As a member of the RMDCP, you’re growing your pension – with your own savings, and Royal Mail adding to them. You’re probably looking forward to taking your money out.
When you reach 55, you can if you want to, even if you keep working. There are three ways you can do it. You can take your money out a bit at a time. You can take it all in one go. Or you can give it to an insurance company in return for a guaranteed income for the rest of your life.
Before you do any of these things, you can take up to a quarter of your money tax-free. You could use this to pay off a debt, to invest in something, or just to go on that special trip you've always dreamed of.
Hang on, there's a bit more to it than that. Let's have a closer look at those three options.
If you take your money gradually, known as 'drawdown', the rest of it carries on being invested. This gives it a chance to grow some more. But there's a risk that your investments don't do as well as you'd hoped. And you might live longer than you expected. That means it can be difficult to be certain that you'll have enough money to last the rest of your life. But if there is money left over when you die, you can leave it to someone.
Taking all of your money in one go sounds great. Because then it's yours to do exactly as you like. On the down side, if you take a big lump, you might get a big tax bill. To help with that, you could take smaller lumps over a few years instead. If you're relying on this money to live on, you'll need to make it last. That could be tricky, because you don't know how long you're going to live. You want to enjoy the money you've saved, but you don't want it to run out.
The third option takes away the worry of running out of money. An insurance company gives you a guaranteed income for the rest of your life - called an annuity. But this income can be smaller than with your other options. And if you want to leave something to someone when you die you need to be careful to choose an annuity that does that.
So, three options: Take your money gradually, take it all at once, or swap it for an income for life. You don't have to choose just one of these things. You can split your money between them if you want to. Whatever you choose, the money you get is treated a bit like your salary, so you might have to pay tax on it. But you won't have to pay national insurance.
To help you think about what's best for you, you can get free guidance on the phone and online from The Pensions Advisory Service and from Pension Wise, who you can also talk to face-to-face if you want.
But if you want someone to recommend the best option for you, you'll need to talk to a financial adviser. And you'll probably have to pay for their advice. For more about financial advisers, go to the Money Advice Service and search for 'adviser'.
