INCOME WITHOUT LIMITS

What is Flexible Access Drawdown?

Under the pension legislation changes in 2015, everyone now has the option to choose the level of income they can withdraw from their pension.

Previously proof of a secured yearly income of at least £12,000 was required before the freedoms were granted.

Choose an income of your choice

You can choose an income of your choice, without any upper limits.

Offers flexibility

It's possible to take a tax free lump sum and leave the remaining invested.

The fund remains invested

The fund could grow further, although this is not guaranteed. It could also decrease in value.

A flexible option for your retirement income

Since April 2015 everyone has been eligible for Flexible Drawdown, which allows you to take out an income that isn’t restricted by GAD Rates. This means that people are able to take out an income to suit their circumstances and can even strip out the whole of the fund if that is what they wish, although there are risks associated with this. These risks are outlined in the pros and cons table.

CONs

1. Money taken from a pension is taxed as income so if you withdraw a large amount or you are still working you could be pushed in to a higher tax bracket - seeking financial advice is crucial here to fully understand the implications when withdrawing your pension fund.
2. If people prematurely empty their pension fund they will be forced to fall back on state pension.
3. Taking an income from a drawdown product will result in a reduction to the annual allowance.

PROs

1. Choose an income of your choice without limits to suit your personal circumstances.
2. There is no longer a 55% tax rate to apply on death to pension pots in drawdown left to beneficiaries.
3. There is flexibility to strip out a pension pot entirely or use it to receive a regular income - always seek financial advice before making a decision.

Case Study

Julie is 61 and has a pension pot of £210,000. She has decided to enter drawdown as she sees it as an ideal way to control the income she receives while limiting the taxation she pays.

Julie doesn’t want much income this year as she retired half way through the tax year and wants to avoid breaking through the high tax rate threshold, so she opts to withdraw £3,000 to spend on a holiday.

However, the following year, Julie is planning on withdrawing £25,000 and due to being retired will be using this as her main source of income. As it will be a new tax year she doesn’t have to worry about moving in to the top tax bracket.

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Pense is a trading style of Ashcroft Financial Solutions Ltd which is authorised and regulated by the Financial Conduct Authority number 231629. Find us on the FCA Website here