Pension Drawdown

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.

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Pension Release for over 50’s

Are you aged 50 plus?

Pension Release gives you Tax-Free Cash

If you are aged 50 plus and considering pension release, the minimum age increases from 50 to 55 in 2010, so now is the time to contact us

What is pension release?

Pension Release or ‘unlocking’ is the term used for taking the benefits from your pension before you retire and getting up to the maximum tax free cash and/or income.

How much can I release?

The current rules say that you can release a cash lump sum of up to 25% of the value of your pension fund. This is tax free and is know as a ‘Pension Commencement Lump Sum’ (PCLS). In addition, the remaining fund can be used to provide you with an income that might be taxable – depending on your circumstances.

Take action now as the age changes to 55 from April 2010

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Purchased Life Annuity Rates

What is a purchase life annuity?

It’s a contract that gives you an income for the rest of your life or for a select period of years, bought with a lump sum single payment.

Want to invest some money to get a guaranteed income?

Tips on purchase life annuity purchase

Why would I buy one?

This type of annuity is useful if you need a regular income and have some money to invest. You might want to:

  • top-up existing pension income;
  • pay for fees such as those for a retirement home;
  • get additional income until you receive your pension;
  • get a regular income until other investments mature;
  • provide income for a child or grandchild at college or university.

If you’ve a lump-sum to invest from a source such as:

  • a sale of a house or shares;
  • a tax-free lump sum from a pension fund;
  • your savings;
  • an inheritance;
  • an unexpected windfall;
  • a maturing life plan; or
  • a redundancy payment,

What about tax?

Part of the income you receive is tax-free. Your gross income payments are made up of two parts, a ‘capital’ part and an ‘interest’ part. The capital part is treated as a return of your capital and so is not taxed. We normally pay the interest part after deducting tax at the savings rate. You may need to pay more or less than this, depending on your tax rate.

Enhanced Annuity Rates – Check if you qualify

If you can answer yes to any of the following questions you may be able to obtain a higher income:

  • Do you regularly smoke cigarettes?
  • Do you take regular medication?
  • Have you ever been hospitalised for a medical conditions

If you have answered yes to any of the above questions, we will check if you qualify for special annuity rates.

Estimated up to 40% qualify for enhanced annuity rates

Examples of some of the conditions that may qualify

  • cancer
  • heart conditions
  • diabetes
  • asthma
  • obesity
  • high blood pressure
  • organ transplants
  • stroke
  • liver disease
  • alzheimer’s
  • chronic lung disease
  • kidney disease
  • multiple sclerosis
  • Parkinson’s Disease
  • or a disease of the central nervous system.

Open Market Option

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.