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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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Annuity Options
March 2nd, 2011 | Income Drawdown

Annuity OptionsBefore you start thinking about income drawdown, it is important to look at other annuity options, mainly lifetime annuities. Neither of these options are perfect. They both have major advantages and disadvantages which can be nullified or exacerbated depending on your individual circumstances. It would be incorrect to dismiss either option without thorough investigation because what is good for one pension holder may not be the right choice for another.

Lifetime Annuity

This is the most basic and common pension choice which is chosen by those looking for a hassle-free way of securing their money. Once you are allowed access to your pension, you can withdraw 25% of the total fund tax-free and purchase an annuity for life with the remaining money. There are dozens of insurance companies in the UK that offer annuities with numerous websites offering comparisons between these corporations.

Single Or Joint

When you are purchasing a lifetime annuity, you are given a handful of choices. A single life annuity is the most common and provides you with a constant source of secured income for life. A joint life annuity continues to pay your spouse or partner the remaining value of the fund in regular payments which will be less than what is received with single life annuities.

Fixed Level Or Value Protected

Another option gives you the choice of maintaining the same level of income each year or an income that starts at a lower level then rises every year. While the set level income is an attractive initial option, be sure to factor inflation into your calculations. The value protected annuity pays a lump sum to a beneficiary of your choosing if you were to die before the age of 75. This sum depends on the original value of the annuity and the amount paid out so far as the former is subtracted from the latter. This sum is then taxed at a rate of 35%.

Certain companies actually pay higher levels of income should you suffer from a serious illness. This may seem strange until you realise that this is not insurance, it is money you are entitled to. So if you have a shorter time to live potentially, you should receive a higher income.

Investment Based

The common consensus is that annuities are fixed. In actual fact, it is possible to purchase investment based annuities which involve placing the pension fund into investment funds. This could lead to a higher return on investment than fixed annuities but there is always the danger that the fund will fall in value costing the pension holder money. The articles ahead discuss fixed rate annuities only.

One reason why many people are steering clear of annuities is the lack of flexibility. All benefits must be chosen at the start and neither the terms nor the provider can be changed. The annuity gives you a fixed income for the rest of your life or that of your spouse should you choose a spouse’s pension. If you have not chosen extra options, the value of your annuity will be zero the day you die. Any references to spouses in the following articles relate to financial dependents as well as civil partners. 

Tax-Free Cash

This is another name for Pension Commencement Lump Sum. In almost all cases, once you reach retirement age, you will be allowed withdraw up to 25% of the value of your pension in tax-free cash. Your remaining money will be used to provide taxable income. Although it is tempting to immediately withdraw this amount, remember that it will result in less income available in future.

It is possible to withdraw the cash and place it back into another pension but certain providers have rules against this and may charge a heavy rate of tax. Such a practice is viewed as ‘cash recycling’ and is generally frowned upon. If you take benefits via income drawdown or any other form, what is known as a ‘Benefit Crystallisation Event’ will occur.

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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