Sell Pensions

Sell Pensions

‘Sell pensions’ is not a truly accurate term in regards to pensions and at best may refer to the process of releasing your pension benefits in exchange for an income. In this instance, to sell pensions may be accomplished by the purchase of an annuity. But you should be clear, that despite the usage of the term on this page, to sell pensions is not an accurate description. And you certainly cannot sell pensions to someone for a cash lump sum like you would a commodity.

Annuity Purchase

An annuity purchase is perhaps the closest meaning to ‘sell pensions’, as you effectively exchange your pension funds for that of an annuity contract from an insurance company. Once you sell pensions you hold in exchange for an annuity, the annuity will provide you with an income for the rest of your life at regular intervals of your choosing from outset.

However, caution should be applied when you sell pensions for an annuity; any decision you make on your annuity when you first take it out cannot be altered.

You will also want to sell pensions for an annuity at the right time because should you do so too early (say at age 55), then the amount of income you receive is likely to be significantly lower than if you waited until a later age, such as 65. This is because annuities are designed to use the pension funds you hold to provide you with an income for the rest of your life. All other things being equal the later you leave taking an income the shorter your life expectancy, thus leaving less years to spread your income requirements across.

In addition to the income you receive when you sell pensions, you will be entitled to a tax free cash entitlement. This allows you to release up to 25% of your pension pot as a tax free cash lump sum that may be utilised how you desire. You do not sell pensions funds to release this tax free cash amount; it is more akin to releasing funds that you already own before the rest is reinvested for your income into retirement.

Income Drawdown

An alternative that you may consider to an annuity is to take an income directly from your pension funds in what is known as income drawdown. This effectively allows you to bypass the need to sell pensions and instead allows you to keep control of where they are invested as you take an income.

By choosing not to sell pensions in this way you have more control over your income and how you want to receive it each year. However, if your pension funds do not perform adequately they may fail to provide you with an income throughout your remaining life; as such it is important to carefully select what investment you want or if you would prefer to sell pensions in exchange for an annuity.