Income Drawdown

Income Drawdown (also known as Pension fund withdrawal) is an important retirement option worth considering, particularly for individuals who have larger pension funds, typically in excess of £150,000 after taking any pension commencement lump sum (tax free cash) entitlement.

Pension Fund Withdrawal was introduced as an alternative option to purchasing an annuity at retirement. Pension Fund Withdrawal allows an income to be taken directly from the pension fund itself.

Under Pension Fund Withdrawal there are now two options, Capped Drawdown and Flexi-Access Drawdown.

Capped Drawdown

No longer available to new retirees, but many existing retirees will be receiving an income from this method.

An annual income can be taken from the fund if required. However a maximum level is set by the Governments Actuary Department (GAD) based on the size of the fund, age and current gilt yields. These GAD tables are broadly equivalent to a single life level annuity that you could have purchased. The maximum income can be no more than 150% of the GAD rate, with the corresponding minimum income currently set at 0%. This GAD rate will be reviewed every 3 years.

Death benefits depend upon age at death, and the method of income taken. In any event it is not possible for a beneficiary to receive income from Capped Drawdown, so a Flexi-Access plan would need to be set up/

Flexi-Access Drawdown

Flexible drawdown was introduced from 6th April 2011 and changed to Flexi-Access drawdown from 6th April 2015, when Pension Freedoms were introduced. Now you can take as much income as you want from your pension fund from age 55, whilst keeping any remaining fund invested.

Given the nature of Flexi-Access Drawdown advice is needed, and this is where we can help you.

A PENSION IS A LONG TERM INVESTMENT THE FUND VALUE MAY FLUCTUATE AND CAN GO DOWN. YOUR EVENTUAL INCOME MAY DEPEND ON THE SIZE OF THE FUND AT RETIREMENT, FUTURE INTEREST RATES, AND TAX LEGISLATION