Flexi Access Drawdown
The main alternative to an annuity purchase is a Flexi Access Drawdown plan
What is Flexi Access Drawdown?
For those with larger pension funds or a significant amount of other assets, alternative routes for pension income are available. These plans could offer you the ability to retain some form of investment control over your pension and flexibility on your income levels.
To effect a Flexi Access Drawdown Plan, you would generally transfer your existing plan to a new provider’s Personal Pension Plan or Self Invested Personal Pension Plan. This type of plan allows you to select a level of required income. There is no current minimum or maximum income level; this type of pension plan offers flexibility of income.
Flexi Access Drawdown will allow you to take the maximum tax-free cash sum and any income you decide to take from the plan will be taxed as earned income.
The fund is invested in a portfolio of funds. These will be discussed with your Retirement Consultant and a portfolio will be selected in line with your accepted attitude to risk and income requirements. It would be beneficial to review your plan every year to ensure that your investments remain in line with your requirements and current market conditions.
The death benefits available under Drawdown are much more beneficial than those available under Annuity purchase. Current legislation allows the following death benefits from a Drawdown plan prior to age 75:
Current legislation allows the following death benefits from a Drawdown plan after age 75:
Please be aware that the higher the income you choose to take from this type of plan, the higher the risk you are accepting. The income you choose to take may not be sustainable from your pension fund and your pension fund may be eroded. The value of your remaining pension fund can rise and fall dependent upon the performance of the underlying investment funds.
You should also note that accessing Flexi Access Drawdown there would be restrictions on the amount of pension contributions you could make in future years to Money Purchase plans, up to £10,000 pa. Please note that this includes contributions by your employer as well as you. Taking solely a lump sum does not trigger this restriction.
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