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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