An alternative solution to the traditional route

An alternative option to drawing on your pension is to use a process called 'income drawdown' or 'income withdrawal', which provides you with additional flexibility. By taking income drawdown when you retire, you can delay the purchase of your annuity until you are 75. In the meantime, you draw an income directly from your pension fund. This income must be at least 35 per cent and not more than 100 per cent of an amount calculated using factors provided by the Government Actuary’s Department. 

Continued Investment

The main advantage of income drawdown is that you are able to take the income you require (subject to certain limits) while ensuring your fund stays invested in assets with more potential for growth.

If you die while you are taking income withdrawals, then all or part of your pension fund could be passed, at the discretion of the scheme trustees/administrator, to one or more beneficiaries. There are two options that we can discuss with you.

Phased income withdrawal

Another option which could be considered by members of personal pension and stakeholder schemes is phased income withdrawal. This normally takes advantage of the way in which personal pension/stakeholder schemes are established as a series of (often 1,000) arrangements.

Under this approach, the individual’s desired net income is provided by a combination of tax-free cash and net-of-tax income withdrawals from an appropriate number of arrangements that need to be vested to achieve this. 

This has a number of key attractions:

•                 the ability to provide the desired income in the early years in a highly tax-efficient manner, as part of the income is made up of tax-free cash 

•                 an individual could receive their desired income without the need to commit to a particular type of annuity, which subsequently may not reflect his/her ongoing circumstances  

•                the level of income being taken from his/her vested arrangements can be varied between the minimum and maximum allowable levels. This could enable him/her to integrate such income with other sources of income, such as the proceeds of a maturing endowment policy 

•                 the ability to provide the largest lump sum death benefit when considering the main retirement options, such as an annuity or income withdrawal 

•                 the ability for all of the funds (both in respect of vested and non-vested arrangements) to continue to grow in tax-privileged funds and remain under the control of the member.

If you would like to discuss these two options, please contact us for an 

informed independent assessment of your situation.