The Prudential Flexible Retirement Plan (FRP) offers the following benefits:

• Single product wrapper containing a personal pension, income drawdown and SIPP options
• Account style structure allowing ease of transition between the different components of FRP
• Ability to hold protected rights and non protected rights
• Lifetime value charging structure with AMC discounts for fund size and longevity of investment (excludes the Self-Invested Fund and the Income Drawdown Holding Account)
• Transparent and flexible
• Wide range of investment options including the recent addition of our PruFund Cautious Funds, and PruSelect fund range

Find out more about how this product could benefit you call 0800 043 0725

Kevin Stelfox, Retirement Solutions, Independent Financial Advice on Income Drawdown

Annuity v Drawdown Income Rates

The tables below show the amount of annual income that can be derived from an Annuity and an Income Drawdown or Pension Drawdown as it is sometimes called. Rates after different for a men and women. 

This income is based on the FTSE 15-year gilt yield of 3.75% for October 2009. This rate can vary on a monthly basis so these figures are for guidance only.  An Income Drawdown allows you to take an income that is 120% of the Government Actuary Department (GAD) rate which is 3.75% for the examples shown.  The annuity income is based on a single life with no guarantees and level income.

The first table shows the amounts for a man with an initial fund of £133,333.  The income is based on the fund of £100,000 after the 25% tax-free lump sum of £33,333 has been paid out.

Pension Drawdown or Unsecured Pension

Expert Advice on Pension Drawdown

This involves you taking up to 25 per cent of your fund as tax free cash, and leaving the remainder of your pension fund invested. In the meantime, you can take income as and when you need it from the fund, subject to certain Inland Revenue limits, but you are not obliged to take income each year. If you want, you can choose to take no income at all for as long as you like until age 75 when you are obliged to either buy an annuity or transfer the fund to an Alternatively Secured Pension or ASP.

The minimum income you can take from an unsecured pension is zero and the maximum is roughly 120 per cent of what a single, level annuity would pay someone of your age. Unsecured pensions replaced “income drawdown” when the new rules for pension simplification came into force on 6 April 2006.

The advantages of taking an unsecured pension

Taking an unsecured pension has a number of advantages including:

• income flexibility – each year the amount of income taken can be varied between the minimum and maximum limits. Income can also be taken monthly, quarterly, half yearly or annually.
• control over your investments – if the unsecured pension is set up through a self invested personal pension or Sipp, there is a wide range of investment options available.
• choice of death benefits – unlike annuities where the only death benefits available are from a joint life, guaranteed, or money back annuity, drawdown offers a choice of death benefits.

For more information visit annuitysupermarket.com

The annuity market is very competitive and rates differ between annuity providers. You can substantially increase your pension income by purchasing your annuity from the company which pays the most income. This is called “exercising the Open Market Option.” It costs nothing to take advantage of this option and new rules introduced recently by the FSA mean that insurance companies must tell you about this option.