What are the minimum income requirements?

21st May 2012

Although in general there is no minimum income requirement, you will find that the larger amount of money that you have to invest, the more options that there are available to you. Although in recent years many companies have opened up the marketplace to investors with smaller pension pots, many larger annuity providers still offer a standard minimum investment of £10,000 or more to allow you to purchase a range of flexible annuity plans.

What are the benefits of having a larger pension fund to invest?

Although you can make a sustainable income through having both a large or small pension fund, having a larger pension fund essentially gives you more flexibility when you are looking at purchasing an annuity. In general you will need a reasonable amount of money to receive a reasonable amount of income from your annuity – and this is where you need to be realistic about the amount of money that you require to live.

Taking the whole amount as a lump sum

If you have a very small pension fund then you may not consider investing in an annuity – it simply may not be worth it and in some situations you may be eligible to take this amount as a lump sum. As part of a new introduction this year, the Government will now allow anyone with a pension pot of up to £2,000 to take it as a lump sum, rather than having to invest it or to draw it out as a pension. A quarter of this lump sum can be taken as a tax-free amount, but the rest is eligible to be taxed at the prevailing income tax rates.

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