Retirement options—DC members
Retirement options—DC members

The following Pensions guidance note provides comprehensive and up to date legal information covering:

  • Retirement options—DC members
  • Admission ages and retirement ages in pension schemes
  • Tax relief on pension contributions—age limited?
  • When is the pension pot payable?
  • How can the pension pot be used on retirement?
  • What were the retirement options before 6 April 2015?
  • Tax issues on retirement

THIS PRACTICE NOTE APPLIES IN RELATION TO DEFINED CONTRIBUTION PENSION SCHEMES

In a defined contribution (DC) scheme (whether an occupational pension scheme or a personal pension scheme (contract based scheme)), the amount of benefits a member is entitled to will be primarily determined by:

  1. the amount of contributions paid in by, or on behalf of, the DC member, and

  2. the investment performance of those contributions

The total amount of benefits payable from a scheme to a DC member is referred to as the member's 'pension pot' or 'individual account'.

Admission ages and retirement ages in pension schemes

Occupational pension schemes can set minimum and maximum ages for admission to the scheme. The scheme rules usually expressly provide when the member can take early or late retirement. This is known as early retirement pivot age or a late retirement pivot age (different ages may be specified for deferred and active members) without falling foul of the age equality laws. Alternatively, pivot ages may be established by custom and practice—although this is more rare. Pivot ages are the earliest age at which a member can draw benefits from the scheme without the consent of the trustees or the employer and where there is no reduction applied for early payment. In addition, there may also be special provisions for early retirement without reduction under