I only have a small pension fund. Does this make a difference?

11th April 2012

Although some people save hard throughout their lifetime for retirement, others, often through no fault of their own, arrive at retirement with a relatively small pension pot. Although this can be  cause for concern for many people, small pension pots do not mean that you are unable to purchase an annuity and you can still receive a retirement income, you just need to take the time to shop around and look at the options available to you.

What options are available to people with a small pension pot?

There are a number of options available to people with a smaller pension pot, depending on how you are planning on investing your money. For people with company pension pots that are less than £2,000 there is an option to take the pension pot as cash, and if this pension is an occupational single pension scheme then you will be able to take the full amount as a tax free income.

If you have a small pension pot then chances are that you might have more than one, in this situation you may look at combining your pension pots together so that they reach an amount which you would choose to invest in an annuity. Pension pots can be combined when it comes to purchasing an annuity and this is one way to help ensure that you reach the minimum amount threshold.

What are some drawbacks of small pension pots?

One of the major benefits of being able to make money on your annuity is having the ability to shop around for a wide range of different annuity options. This means that you have the chance to find a plan which is tailored to meet your needs, and could take into account your personal circumstances and any health problems which you might have.

The problem with small pension pots is that in some situations you may lose this choice as there aren’t an awful lot of annuity companies that tailor their plans towards people with a smaller pension fund, this means that you might not have as much choice as if you had a larger pension fund and therefore you may not make such a high return from your investment.

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