XPS Administration - IBM Pension Trust

Pension Freedoms

Updated on 26 May 2021

We’re here to help – from telling you your current pension value to explaining your choices when you retire.

The Government introduced ‘Pension Freedoms’ in 2015 for people with defined contribution pension savings. This gives you multiple choices for how to use your pension savings. As a member of the Hybrid Deferred Plan, you will have to transfer your pension benefits to access the choices shown below. Please see ‘Your IBM retirement options’ for details about your transfer options.

Your choices

You will be able to choose to:

  • Buy an annuity – You can use all or part of your pension savings to buy an annuity, which provides a regular and guaranteed income for life.

  • Take a cash sum – You can take 25% of your pension savings as a tax-free cash sum. You can use the remaining 75% to buy an annuity, take a flexible income, or you can take it all as taxable cash.

  • Take a flexible income (also known as ‘flexi-access drawdown’) – You can leave your pension savings invested and take cash sums out whenever you wish. 25% of each sum is usually tax free and the rest is taxable.

  • Delay taking any benefits – You can leave your pension with the Hybrid Deferred Plan and access the money later, when you need it.

  • Combine options – You can combine any of these options when you retire and make changes in the future.

Making your choice

What’s right for you will depend on many things, including:

When you plan to stop or reduce your work
This will directly affect the income you have. You may, for example, only need your pension savings to supplement your income when you first retire.

Your age and health when you retire
This is one of the main things to consider as you approach retirement… and there’s plenty to think about. If you have a long-term condition that is likely to reduce how long you live, then an annuity that guarantees you an income might be right for you. If you’re relatively young, fit and healthy when you retire you may decide to travel and take up lots of activities – these are all likely to cost you money, and you may want to have flexible access to your pension fund.

The size of your pension fund and other savings
It’s important to look at the ‘big picture’ before making any decisions about your Hybrid Deferred Plan. Think about the pension savings you may have built up with other companies. You should also include other savings such as ISAs as well as any savings your spouse or partner has built up.

If you have dependants who rely on you
Many people will still be financially supporting their children at university when they retire.

Whether your circumstances are likely to change in the future
None of us have a crystal ball but if you know you will be paying off your mortgage or downsizing soon after you retire, you should include this in your planning.

The Bigger Picture

You may find the following sources of information and advice useful:
  • Pension Wise: A free and impartial government service for anyone over age 50 with defined contribution pension savings. 
    Tel: 0800 138 3944
  • The Money Advice Service: Advice about types of pension and retirement income. 

  • Further advice: Starting point to find your nearest Independent Financial Adviser. 

Updated on 26 May 2021