What Is Pension Drawdown ?
” Pension Adviser Derby ” – Credencis Interpreting What is Pension Drawdown
Pension Drawdown Common References
Income release, pension release and income drawdown are the 3 most common terms used when describing pension drawdown. It is a much favoured alternative to buying an annuity in the current retirement financial market. Pension Adviser Derby reference 1.03
Regulations / Key Points
A person must be over 55, have a pension fund that has accumulated to a suitable level. They are able to release a cash lump sum, tax free without having to retire, essentially taking an income from the fund.
What can i do with pension drawdown ? – Credencis, Pension Adviser Derby Says:
Regular Income Withdrawals
In addition to the tax free lump sum you are allowed to take regular income withdrawals, bear in mind that these withdrawals may be subject to tax depending on your personal tax allowance.
Invested Until Retirement
The remainder of your pension fund after the tax free lump sum will continue to be invested until you reach state retirement age. Pension adviser Derby (Credencis) highlights that pension drawdown is not suitable for everyone.
Releasing Fund Considerations
There are many alternative means to raising capital, it’s wise to take these into consideration. Remember that releasing funds from your pension early will impact the final value of your pension fund at retirement.
Pension Adviser Derby Important Reminder – “What is left of your fund after the tax free lump sum remains invested and benefits from a tax efficient environment.”
Pension Fund Release Amount
If you transfer your current pension scheme to a ‘ Pension Drawdown ‘ plan, you will be entitled to release a one off, tax free lump sum upto a maximum of 25%
Taking The Fund
The tax free cash must be taken when the pension drawdown fund is setup although you are not obliged to take any lump sum at all, just bear in mind that you will only have the opportunity to do this once.
Maximum Income Level
April 2006 saw regulation changes which means there is no minimum income level you have to take just as there is no maximum level either. You are entitled to vary the level income from year to year.