Discover the benefits of Pension Drawdown

Take your tax-free cash and leave your pension invested with Pension Drawdown

Drawdown is a higher risk option than buying an annuity and only suitable if you have alternative sources of income or other pensions. It allows you to take the tax free cash and leave the remainder of your pension fund invested with the option to take an income if required of up to 120% of an annuity (standard single life, level with no guarantee basis) until a retirement age of 75.

Instead of buying an annuity with the remainder of the fund, the money remains invested, where it may benefit from investment performance in a tax-efficient environment. You may in this way defer taking an annuity until such time it is considered more appropriate. Before April 2006, an annuity had to be bought by age 75. This is no longer necessary, although the member must move into ‘Alternatively Secured Income’, a more restrictive form of Unsecured Income.

The word ‘unsecured’ is used to differentiate between Annuity purchase – where the pension income is ‘secured’, fixed for life, and carries guarantees to this effect. As ‘unsecured’ funds remain invested, there are no guarantees that any level of income can be maintained indefinitely.

To find out more vist the pension drawdown calculator. here

What types of annuity are there?

There are various types of annuities with different options that you can add, which allow you to customise your annuity to suit you. These are some of the most common ones.

Single life annuity – This annuity provides you with an income for your life. It doesn’t provide an income for your spouse, civil partner or dependant after you die.

Joint life annuity – This annuity is designed to pay an income to you during your life and to continue paying out to your surviving spouse, civil partner or dependent after you die at the same or a reduced rate.

Guaranteed period annuity option – This annuity provides a guarantee to continue paying your income for a fixed period from your retirement date, up to a maximum of ten years, even if you die during this period.

Level annuity option – This annuity pays out the same amount of income every year for the duration of your life, or that of your spouse, civil partner or dependent if that’s what you choose.

Escalating annuity option – The income you receive will normally increase each year, either by a fixed rate, or in line with the UK Retail Price Index (RPI), which means it will increase with inflation.

Enhanced annuity (also known as an impaired life annuity) – If you or your spouse, Civil partner or dependent has, or previously had, certain medical conditions, you may be able to buy an annuity that will give you a higher income based on your/their potentially reduced life expectancy.

Investment-linked or with-profits annuity – The level of income from an investment-linked or with-profits annuity depends on the performance of the investment funds chosen. This means that the level of income can go down as well as up.

Smoker Annuity Enhanced Pension For Smokers

When obtaining quotes for annuities you need to consider whether or not you make qualify for any enhancements to the annuity rates that would be available for your age.

Smoker enhanced annuity rates are available for those who smoke at least ten cigarettes a day (or 85 grams of rolling tobacco per week) and have done so for at least the last ten years this has an effect on their life expectancy. We take this into account to give them a bigger annuity.

We believe in giving people the full benefit of their pension fund, taking account of their personal circumstances.

The providers we use carry out spot checks and in some cases obtain doctors’ reports to verify the smoking information provided in the application. If they find evidence that does not support the information the client has supplied and they are not eligible for smoker annuity rates their pension will be reduced. The reduction will be significant and the pension will be less than could have been received from another company. They may also recover any overpayments.

Other enhancements may apply for smokers and it is always best to consult with an annuity specialist to ensure that you get the best annuity rates possible. Remember once you have bought your annuity it cannot be changed.

For the Best Annuity Rates contact Retirement Solutions on 0800 043 6701

Value Protection – Is it worth the cost?

Value Protection (sometimes known as annuity protection or capital protection) is an option that returns a lump sum if the annuitant dies before their 75th birthday, giving the ability to protect a percentage of the pension fund, right up to 100%.

The lump sum payable on death is the percentage of the pension fund that is protected, less the total gross income already paid to the annuitant(s) as an income. The lump sum, if paid, will be taxed, currently at the rate of 35%.

Points to Consider

  • Provides a return of money to the client’s nominated beneficiary should death occur before age 75.
  • Protect up to 100% of your pension fund.
  • Available on a single or joint life basis
  • Dying after age 75 will result in no lump sum being paid.
  • Any lump sum will be taxed at 35% before it is released to the nominated beneficiary and is not normally counted as part of the estate for inheritance tax purposes

For Annuity Advice and Comparisons call 0800 043 6701

Visit our website to use the annuity calculator