Phased retirement

This option involves placing the transfer value into a plan which is segmented into, usually, 1,000 policies. The funds and the tax free cash allowance are split equally across the plans.

Each segment can offer a maximum of 25% of the fund as tax free cash. If investment returns are good, this figure should increase in proportion to the fund value until the benefit is drawn. Please be aware that the value of investments can fall as well as rise.

In practice, you will decide how much income you need and we will advise the number of segments to encash to provide that level of income. The tax free cash figure available will be used to supplement the income, so reducing your income tax liability.

Each time an annuity is purchased, you can decide whether it should include a guarantee, indexation and widow's pension as appropriate to your circumstances. A more detailed explanation of these options is included at Appendix Four. You will have the option of all the annuity types described in Appendix Three earlier and any future developments.

Phased Retirement is generally only suitable if you have a fairly large pension fund, or have other assets or income to live on. This is because the bulk of your pension savings remain invested, which may be more risky than buying an annuity straight away.