What is income drawdown?
Recent changes as part of pension reform freedom and choice removed the requirement to purchase an annuity at retirement with a defined contribution pension. Income drawdown as one of the other available options, allows an income to be taken directly from the pension fund itself.
Unlike Phased Retirement under drawdown, income is taken directly from the fund. Since April 2015 and under the Pension freedom rules, it may be possible to take an unlimited level of income from the plan. The new Flexi-Access Drawdown rules give you a huge amount of control over how much pension income you receive and when. This can have great benefits in managing your income tax in retirement.
As your drawdown pension pot is outside of your estate for Inheritance Tax and you can pass your pension pot on to anyone on your death, personal pensions have become a powerful tool in estate planning and Inheritance Tax mitigation. This makes makes accessing expert financial planning even more important than ever.
Before this, the maximum income was set by the Government Actuary’s Department (GAD), who set limits based on the size of the fund, age, sex and gilt yields. This was applicable to Capped Income Drawdown products, which still exist.
The importance of seeking professional advice
Eastcote Wealth Management has years’ experience in this area and can help you to access the options available to you and help you to maximise your pension on retirement. Please be careful with your hard-earned pension savings and think very carefully before cashing them in or moving them. If you’re offered a scheme which seems too-good-to-be-true, it probably is. For further information, see www.pensionsadvisoryservice.org.uk/pension-problems/making-a-complaint/common-concerns/pension-scams.
Please do not hesitate to contact us if you would like to discuss your options in more detail. Remember, we offer a free no obligation consultation and will be happy to help if we can. We take a holistic and long-term approach to wealth management, opting to build a lasting relationship with you and provide a tailored solution for all of your investments.
A pension is a long-term investment. The fund value may fluctuate and can down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. Occupational pension schemes are regulated by the pensions regulator.