Post retirement
Capped/Flexible Drawdown
Since 6th April 2011, 'Unsecured Pension' is defined as a form of either Capped or Flexible Drawdown.
Capped or flexible drawdown allows you to take part of your pension fund as a 'Pension Commencement Lump Sum' (the 'A-Day' phrase for tax-free cash) and to defer the purchase of a lifetime annuity indefinitely.
In the meantime, you can withdraw, or ‘draw down’, a (taxable) income from the remainder of your pension fund, which remains invested within a tax-advantageous environment.
As a lifetime annuity has not initially been purchased, this potentially allows you greater flexibility and control in the following areas:
- Greater control over the level of your (taxable) income
- More investment control over your pension fund
- Flexibility over the timing of annuity purchase, although currently, you must purchase an annuity by age 75 at the latest (or go into ASP)
- Greater flexibility for your dependants, in the event of your death
As you must firstly transfer your accrued pension fund(s) into an income drawdown plan, it is very important that you initially discuss the feasibility of the transfer(s) with us.
It is also important that the transfer(s) occur before you take any benefits from the transferring scheme(s). However, you are able to transfer pension funds held within an existing income withdrawal arrangement to an alternative income withdrawal provider.
Pension section links:
occupational pension schemes financial advice | financial advice on stakeholder pension schemes | financial advice on personal pensions | financial advice on sipp | financial advice on post retirement | financial advice on phased retirement | financial advice on annuity purchases
Suitability
Income drawdown will not be suitable for all investors it is essential you fully understand and accept the potential disadvantages and inherent risks involved.
However, income drawdown can still constitute an efficient tax-planning tool, a means of accessing the available Pension Commencement Lump Sum without having to extract any taxable income and as a way of providing an individual (and in particular, their surviving dependants) with a greater range of death benefit options than compared with, for example, lifetime annuity purchase.
