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Transfer and choose to take a bit at a time (drawdown)

At a glance

If you choose to transfer out of the Scheme and invest your pension savings into a drawdown fund, you’ll have:

  • a fund – where your pension savings are invested to give them a chance to potentially grow, and you can take your money as and when you need it (withdrawals are subject to tax, investment growth is not) until it runs out
  • tax-free cash – the option to take up to 25% of your transfer value as a tax-free cash lump sum at the point you retire or to take 25% of each withdrawal tax-free
  • legacy options – the ability to pass on your drawdown fund to your eligible dependants when you die (although there may be tax charges on the fund)
  • the option to buy an annuity at a later date – with whatever savings you have left in your drawdown fund, you can choose to buy a regular income for the rest of your life, called an Annuity
  • To take investment risk, pay ongoing investment and, potentially, advice charges

Privani’s choice

Privani wanted flexibility to take her money a bit at a time, changing how much she took and when. After taking financial advice and confirming that this was the right thing to do, she transferred out of the Scheme and took Drawdown.

Privani’s choice is just an example and does not suggest a particular option that you should choose yourself. Please look at all of the options available to you and consider seeking independent financial advice before making any decisions about your own benefits.

Why this option might suit you

Here is a list of characteristics that this option provides or doesn’t provide. Have a look through and see if these characteristics suit your personal circumstances. You may be required to take financial advice to access this option.

The reassurance of a regular income for life NO Whilst you can withdraw regular amounts, this income is not guaranteed to last you for the rest of your life and it’s your responsibility to make it last as long as you need it. You can, however, purchase an annuity at a later date with whatever is left.
Pension increases to protect against inflation OPTIONAL You can increase the amount you withdraw to protect yourself against increases in the cost of living (inflation), by this we mean as the cost of things like fuel, bread, milk etc. go up, you can withdraw additional money, but it will run out quicker this way.
A pension for my eligible dependant on my death NO You can pass on your drawdown fund to your eligible dependants when you die, but this is not the same as the regular income they could get if you choose the Scheme pension or a joint-life annuity.
Leaving an “inheritance” YES You can pass on your drawdown fund to your eligible dependants when you die (typically tax-free if you die before 75).
Something easy to manage NO Drawdown requires you to manage your investments and your money, to make sure it lasts as long as you need it to.
Money to use now YES You control how much you withdraw and when. You can take up to 25% (one quarter) of your transfer value as a tax-free cash lump sum when you retire or 25% of each withdrawal tax-free. See below for more details. See ‘When should you take tax-free cash with drawdown?’ below for more details.
The flexibility to change my income when I like / need YES You control how much you withdraw and when
The ability to invest my money myself YES Any money not yet withdrawn will need to be invested. Your chosen drawdown provider will have various investment options for you to choose from. You should consider the impact of any ongoing investment and advice fees on your fund and the money you can then withdraw.
Suitable if I expect to live a long time POSSIBLY You control how much you withdraw and when, so this depends on how you manage your money, how your investments perform, how much you withdraw each year and how long you live.

It’s worth noting that on average (based on national figures from the Office for National Statistics) we’ll live until our mid-80s, however there’s a 1 in 4 chance you’ll live in to your 90s and 3 in every hundred people retiring now will live to be 100 years old.
Tax
Tax-free cash lump sum

  • You can currently take up to 25% of your transfer value or 25% of each withdrawal as a tax-free cash lump sum
  • If you die before age 75, you can generally pass your savings to your eligible dependants tax-free
 Income (subject to tax)

  • Withdrawals above your tax-free cash allowance will be taxed at your marginal rate of income tax for the year in which you make the withdrawal
  • You won’t pay tax on investment returns within your drawdown fund
  • On death after 75, the savings remaining can be drawn down or paid as a lump sum, taxed at your eligible dependant’s marginal rate.

When should you take tax-free cash with drawdown?

  • One-off tax-free cash up-front – a quarter of your benefits
  • No up-front cash. A quarter tax-free cash from each withdrawal instead

When you enter drawdown, you have the option to either take 25% of your transfer value up front as a tax-free cash lump sum, or you can take a 25% of each withdrawal you make tax-free. Whether you choose one way or the other will depend on your personal circumstances and tax position, so it’s worth speaking to a financial adviser for advice.

To help you decide which retirement option is right for you, the Trustee has arranged for Origen Financial Services to provide eligible Scheme members with one round of paid-for financial advice. This includes regulated advice in relation to the transfer option. For more information go to the Decide page.

The contract for the advice would be between you and Origen and the advice provided is confidential. It is your choice whether to use Origen. The Trustee and Aptia (formerly Mercer) are not responsible for any advice you receive or any decisions you make, or actions you take, as a consequence of receiving advice.
Built on behalf of the The First Bus Retirement Savings Plan by Willis Towers Watson. The information
  • is a summary of the applicable law and the Scheme’s trust deed and rules as at May 2021
  • is not a definitive statement of the applicable law or the Scheme’s trust deed and rules and is not legally binding
  • does not constitute financial advice or create any entitlements for members (or anyone else) in relation to the Scheme
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