In April 2015 the government introduced important changes, which give members of defined contribution (DC) plans such as the Experian Retirement Savings Plan (ERSP) much more flexibility in how you can take your benefits at retirement. Since that date the law allows you to:

• Take a single cash sum of up to 100% of your account, 25% being tax-free and the remaining 75% being taxable, some or all of which may be at the higher tax rates (currently 40% and 45%). You can also take smaller, multiple, cash sums, in which case 25% of each cash sum is tax-free with the remainder being taxed. This option is known as ‘uncrystallised fund pension lump sums’ or ‘UFPLS’. If you choose to take UFPLS but continue to contribute to a DC plan then future tax efficient contributions will be restricted to £10,000 a year (known as the money purchase annual allowance or MPAA).

At retirement you can also choose to :

• Take smaller taxable cash sums as and when required, with the option of taking up to 25% of your account as tax-free cash at retirement (known  as ‘flexi-access drawdown’,‘FAD’,or ‘drawdown’). If you withdraw more than 25% of your retirement savings then the MPAA of £10,000 will apply to future DC retirement savings;

• Buy a regular taxable lifetime income (known as an annuity) from an insurance company, with the option of taking 25% of your account as tax-free cash ;

• Take a combination of UFPLS, drawdown and annuity benefits.

Access to these flexibilities is not automatic, although UFPLS and drawdown are commonly available under individual arrangements such as personal pensions. Full flexibility is less common under occupational plans like the ERSP, and depends on what is agreed by employers and trustees. 

We are pleased to confirm that a limited UFPLS facility is being introduced under the ERSP from next year, and you will be able to take a single cash sum of up to 100% of your account at retirement or smaller multiple cash sums for a period of up to three years following your retirement date.

Full details of the UFPLS facility will be included in retirement packs provided by the Experian Pensions team at Capita. However, any members who wish to take advantage of the drawdown option or require UFPLS for longer than three years will need to transfer their savings to an external arrangement like a personal pension, as drawdown is not available under the ERSP.

You are strongly recommended to seek professional financial advice if you are unsure which benefit is appropriate for you based on your personal circumstances. The government has also introduced Pension Wise, a free and impartial government service which has been launched to help you understand your options at retirement. Visit www.pensionwise.gov.uk or call 0300 330 1001 for further details.