Pensions
Post Retirement
Unsecured Pension
Since 6th April 2006 (‘A-Day’), income drawdown is defined as a form of ‘Unsecured Pension’.
Income withdrawal 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 until, for example, your 75th birthday. Alternatively, you could opt to purchase an ‘Alternatively Secured Pension’ (ASP) at age 75.
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.
Pension section links:
advice on occupational pension schemes | stakeholder pension schemes | personal pensions | sipp | post retirement | phased retirement | annuity purchases
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.
Suitability
Income drawdown will not be suitable for all investors it is essential you fully understands and accepts 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.
