Flexible Drawdown - available from 6 April 2011
Clients approaching retirement who do not want the security of annuitising their pension now have two choices, Capped Drawdown (previously called income withdrawal or pension drawdown) and the new Flexible Drawdown.
Flexible drawdown was introduced from April 2011, allowing individuals to take as much income as required from the pension fund from age 55, whilst keeping any remaining fund invested.
However it is possible that the whole fund can be withdrawn as income (in one lump or in stages), subject to a personal tax liability.
Flexible drawdown is only available to individuals who have other secure pension income from other sources amounting to £20,000 a year, called the Minimum Income Requirement (MIR)** this can include state pensions.
Flexible drawdown could be suitable for individuals who have no need to guarantee any further income because they already have pensions of at least £20,000 a year.
There are a growing range of providers offering access to flexible drawdown pensions and we can advise on, and arrange, the best options for your circumstances.
A superior Flexible Drawdown proposition!
Our Flexible Drawdown options include:
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Ability to transfer in from personal pensions and group schemes (*)
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Ability to convert existing Drawdown funds into Flexible Drawdown (*)
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Full lump sum Flexible Drawdown or
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Phased Flexible Drawdown available or
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Regular and irregular Flexible Drawdown income
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Full investment flexibility for the remaining, available under a SIPP
As an alternative to the SIPP route we can arrange short term annuities to completely divest the fund over a number of years with no investment risk. This can be useful to manage the personal tax liability.
Do you qualify for Flexible Drawdown?
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You must satisfy the Minimum Income Requirement (MIR)** on the relevant date.
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No Relevant Contributions can have been paid to any money purchase arrangement in the tax year in which the declaration is made.
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You cannot have been an active member of a defined benefit scheme at the time the declaration is made. For the avoidance of doubt, this means if you have made a contribution to any such arrangement you cannot move to Flexible Drawdown until the next tax year.
No further tax relievable payments can be made to any registered pension scheme once Flexible Drawdown has been elected. As such you may want to maximise your contributions before moving into Flexible Drawdown, we can advise on using carry forward allowances to help with this.
Tax free cash?
This is no different with Flexible Drawdown; you can still take 25% of the value of your fund as tax free cash from age 55.
What happens to my pension on death?
Uncrytallised pension funds are paid tax free to your beneficiary (within the lifetime allowance) under age 75. If you are over age 75 or if the fund has been crytallised, the remaining lump sum can be paid out less tax at 55%.
What next?
Flexible drawdown is a complicated product and as such we recommend taking advice before making any decisions. We are qualified Independent Advisers who specialise in the “at retirement” market and will be happy to discuss how Flexible drawdown fits with your financial plans.
Full quotes and Flexible Drawdown literature are available on request. Please call 01604 832932 or email us an enquiry contact us.
The process:
Step 1: You contact us with details of your existing pensions and requirements
Step 2: We contact your existing providers to obtain the technical information we need
Step 3: We will run through your options in detail and provide a written report
Step 4: If you want to proceed we will handle the necessary paperwork
Step 5: You receive your tax free cash and full or phased flexible drawdown payment.
(*) As per current legislation, Protected Rights cannot be used for Flexible Drawdown. We expect this restriction to be removed in 2012.
(**) Minimum Income Requirement. To satisfy this requirement you must have an income of at least £20,000 per annum from a scheme pension, a lifetime annuity and the state pension. Income from capped drawdown or index linked annuities is not considered. There is some technical exclusion on small scheme pensions around how secure the pension payments are, but these are likely to affect very few people.