Lockhart Grey Financial Planning Ltd

Pension fund withdrawal (which is also known as Income drawdown) is an important retirement option may be worth considering, particularly for individuals who have pension capital of at least £100,000.

Pension Fund Withdrawal plans were introduced following a number of changes to Pension law in 1995. The changes removed the previous requirement for the individual to purchase an annuity at retirement. Pension Fund Withdrawal allows for an income to be taken directly from the pension fund itself.

Pension Fund Withdrawal may enhance the flexibility in that the annuity purchase can be deferred until a time when it may be more suitable. Most of the major insurance companies now offer an ‘Income drawdown’ facility plan/s. These plans still allow for up to 25% of the retirement fund to be taken as Tax Free Cash.
Income levels are actually determined by reference to the annuity tables produced by the governments’ actuarial department. The maximum income allowable is 120% of the highest level of income determined by the annuity tables, whilst the minimum income which can be taken is nil. These limits allow for further flexibility and so perhaps enable your full retirement from a working life to be gradually phased in. These plans have been categorised as ‘unsecured’ pension plans, eventually an annuity will have to be purchased, usually by the age of 75, although there is now a further option for individuals reaching the age of 75 years to consider – the purchase of an ‘Alternatively secured pension’ plan.

Pension Fund Withdrawal plans can, it seems, be relatively complex and are not suitable for everyone, but they can, for some individuals, offer a flexible approach to retirement. Careful consideration must be given to an individuals own personal circumstances, including the value of their existing pension/s. We strongly recommend you seek advice from us if you are considering this option.