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Income Drawdown

 

Pension Finder introduces you to Income Drawdown advisors with the appropriate level of technical pension knowledge.

Income Drawdown is technically more demanding and structurally very different from an annuity. We strongly recommend appointing a suitably qualified specialist pensions advisor to guide you through all of the planning issues that we will begin to touch on here.

 

 

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  Income Drawdown - more information

Income Drawdown gives more flexibility by leaving the retirement planning door wide open for more definitive decisions at a later date.

If you are approaching retirement and thinking about income drawdown, then it is vital that you and your advisor take as many factors as possible into account, including the following:

  • Death Benefits
  • Rules and Regulations
  • Alternatives
  • Providers
  • Income Requirements
  • Tax Free Cash
  • Inheritance Tax
  • Age
  • Investment Risk
  • Size of Pension Fun

Income Drawdown is a retirement planning option typically available to a person at normal retirement age (NRA) with a total combined pension fund value of over £100,000.

We are happy to introduce you to a suitable advisor if you complete our form today.

Income Drawdown Reviews and Administration:

The need for advice is very obvious when considering what happens next, after you have decided to initially use Income Drawdown as a financial product that supports your retirement planning.

Firstly, Income Drawdown needs to be reviewed and it is most definitely not a one time planning event that finishes when the transaction is completed. So choosing a supportive and reliable advisor that will be there to guide you through each and every review is vital.

Staying up to date with your chosen funds performance, investment fund values and the potential impact that it may be having on your varying income requirements can be confusing. A quality advisor is there to help you understand the financial impact and address these important technical matters.

Completing paperwork like tax returns and keeping up to date with the Income Drawdown rules and regulations can be stressful. Advisors with strong supportive administrative backup teams can help with every step of the process and are worth their weight in gold.

Your income and therefore your income tax calculations may vary depending on how you use your lump sum and subsequent income options. An advisor with strong links to tax practitioners and accountants will be able to plan and demonstrate the optimal strategy for you.

Take your Income Drawdown enquiry up a level and complete our form today.

Risk & Reward

Income Drawdown allows you to keep your options open for much longer and maintain maximum planning flexibility around income.

Mortality statistics are improving, people are living longer and so more pressure is being placed on their pension funds to provide income for significantly more years in retirement.

Inflation and rises in the cost of living can be problematic after all the cost of heating, lighting and food isn’t likely to start falling anytime soon. Trying to have your investment returns out-pace inflation often causes people to start blue sky thinking and taking on too much risk.

If you are seeking certainty about your income in retirement with minimum fuss then you may find your advisor steering your conversation in the direction of an annuity.

Steer yourself through the more challenging issues with a qualified Income Drawdown specialist, complete our form today.

 

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Alternatively Secured Pension (ASP)
March 2nd, 2011 | Income Drawdown

Alternatively Secured PensionsOnce you reach the age of 75, it is possible to continue drawing an income without having to purchase an annuity. To achieve this, simply allow your pension fund to be placed in an Alternatively Secured Pension (ASP). An ASP is similar in nature to income drawdown though there are a number of restrictions which makes it a slightly less attractive option. Below are a list of what an ASP can and cannot do:

  • Although you are still allowed to make a maximum withdrawal like in income drawdown, this limit is likely to be about 25% less.
  • The minimum income that can be taken from an ASP is approximately half that of income drawdown using the same fund.
  • One of the things an ASP has in common with income drawdown is the fact that income limits which have been set are fixed until the next review is undertaken.
  • An ASP will be reviewed using GAD calculations just like in income drawdown but the main difference is the fact that these reviews will be performed annually rather than every five years.
  • You will be allowed to purchase an annuity with your ASP any time you choose which can be a bonus when you take into account the fact that annuity rates get better as you get older. One issue with an ASP is that you are always considered to be 75 years of age when the fund is under review. This means that annuity rates become even better in comparison to the maximum income allowed by an ASP.

As an ASP involves investing money into a fund, there is the same risk of your pension fund falling as there is in income drawdown. The death benefits associated with an ASP are also inferior to their income drawdown counterpart. Remember, you cannot benefit from tax-free cash once you turn 75. Therefore, you must utilise your right to tax-free cash before taking out an ASP.

Phased Retirement

It is not necessary to use your whole pension fund at the same time. It is possible to use only a certain percentage of it to either purchase an annuity or go into income drawdown. Before explaining the process any further, you need to be made aware that choosing phased retirement is known as a Benefit Crystallisation Event which essentially means your fund will be placed under immediately review. This review could end up altering your maximum income allowed and decreasing the amount of money you are allowed withdraw. This automatic review is considered as an addition to the regular review process.

In the event that your maximum income is less than the money you have already withdrawn, you will be unable to place any further money into income drawdown until the following tax year. If you do not like the idea of being forced to use all your benefits or else you don’t financially need to, phased retirement is an option for you.

Death Before Benefits (Brief Explanation)

If you have money left over in your pension fund that has not be used to purchase an annuity or been placed into drawdown when you die, it is possible to have this money paid to a dependent who will not be charged inheritance tax. Another possibility is that your spouse or partner could purchase an annuity or go into drawdown with the remaining money. If you have a contracted out pension, there will already be a stipulation which requires you to provide them with an income in the form of an annuity or drawdown. You can only give it to a beneficiary if there is no spouse or partner in the picture.

The current lifetime allowance for pension funds is £1.8 million but it is to reduced to £1.5 million from 6 April 2012. Your pension fund will be valued to ensure it does not exceed this level. In the event that the fund plus death benefits and pension life insurance go beyond the allowable level, the excess amount will be taxed at 55%. If your fund is used to provide cash for a dependent, this tax charge should be waived.

If you haven't found all the answers that you are looking for you can find similar content in the Income Drawdown sections, contact an adviser at the top of the page, or you could try these related posts:

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