PENSIONS – Flexible Drawdown

As the name suggests this option is much more flexible than income drawdown.
Qualifying for this option removes the cap on the income you can take.

There are no income limits at all and you can draw as much income as you like when you like.  However flexible drawdown will not be available to everyone and there is certain criteria that must be met before you can choose it.

Flexible Drawdown Criteria
The following criteria has been set out by the government to ensure investors can enter flexible drawdown with sufficient secure income in place to help prevent any running out later in retirement.

You must already have a secure pension income of at least £20,000 a year in place.  This can include your state pension, an annuity or a company pension.  Investment income doesn’t count.  Pension pots not needed to provide £20,000 could be taken as flexible drawdown.  Remember – pensions can be split, with part used to buy an annuity to secure the necessary income and the remainder taken as flexible drawdown.  You must receive at least £20,000 of pension income in the tax year you enter flexible drawdown. 

Individuals with a “lifetime income” of at least £20,000 may take unlimited withdrawals from their drawdown funds, provided that the scheme permits it.

Sources of income which count towards the new flexible drawdown include guaranteed lifetime income, state pensions, defined benefits schemes, scheme pensions and lifetime annuities.

It isn’t possible to take flexible drawdown form a protected rights pension (money from contracting out of the State Second Pension or SERPs).  Protected rights are expected to be abolished in April 2012 which will effectively remove this restriction.

Flexible drawdown can only be taken once you have finished saving into pensions.  If pension contributions have been made to any pension in the same tax year or if you are still an active member of a final salary scheme, it isn’t possible to start flexible drawdown.  Once in flexible drawdown it isn’t possible to make further pension contributions.

Financial Advice
Income drawdown is a complex product, and if you are at all uncertain about its suitability for you, we strongly recommend you seek financial advice.

Our advisory team would be happy to help you.  For more information about their services please contact them on 0800 389 3345 or use our contact section on our website.

To talk to one of our advisors, call 0800 3893345 or email info@city-financial.co.uk