Income Drawdown
Income Drawdown (also known as Unsecured Pensions/Pension Fund Withdrawal) is an important retirement option worth considering, particularly for individuals who have pension capital of at least £100,000.
Capped Drawdown
Capped drawdown effectively replaced what we knew as Unsecured Pensions and Alternatively Secured Pensions. You no longer have to crystallise your pension savings at age 75. There is no minimum income after age 75 which is consistent with the current approach before age 75.
Maximum income will be calculated as 100% of the comparable annuity at all ages, as opposed to 120%. Reviews of maximum income will be required every three years if under age 75 and every year for those who are age 75 or over.
Flexible Drawdown
Flexible drawdown will allow those who meet a minimum income requirement (MIR) to take income without limit from their pension savings. The MIR is initially set as relevant income of at least £20,000 each year, which is referred to as the minimum income threshold. There are various types of income that count as relevant income and these can be discussed with your adviser.
The minimum income threshold will be set by Treasury Order and is expected to be reviewed every 5 years.
Income taken from drawdown will be taxed at an individual's marginal rate of tax.
No further pension saving will be allowed for those using flexible drawdown. You will also have to stop being an active member of any defined benefit or cash balance arrangements before using flexible drawdown.
Income Drawdown plans are relatively complex and are not suitable for everyone, but they can for some individuals offer a flexible approach to retirement in later life, particularly if annnuity purchase is not an attractive option (for whatever reason). Careful consideration must be given to an individuals personal circumstances. We strongly recommend advice from us be sought if you are considering this option.