Pension Drawdown In Northampton & Milton Keynes

Income Drawdown

Since the advent of “pension freedoms” in 2015, many people are choosing to access their pensions on a flexible basis under Flexible Access Drawdown (also known as a pension drawdown). This is a way of taking tax free cash and/or income from your plan on an as-needed basis over time, either on a regular basis or as a series of one-off withdrawals to suit your needs.

The first 25% of any withdrawal will be tax free, and the balance will be taxed as income.

To take pension drawdown, you may need to move some or all of your pension into a new plan specifically designed to provide a flexible income in your retirement. It is important to bear in mind that under this option the pension remains invested and can therefore go up and down in value, and the value of the fund should be regularly tracked to see how it is doing and to ensure that the pot doesn’t run out.
Things to Think About With Pension Drawdown:
- You should carefully consider your capital and income needs in retirement – pension drawdown could, for instance, be used in combination with other retirement income streams such as occupational pensions and the state pension, or non-pension income such as rental or savings income.
- Deciding how much income you can afford to take and how long you will need your money to last needs careful planning. If too much income is taken too quickly from a pension drawdown plan, the value of the fund may fall or run out too soon, especially if stock markets fall.
- You could use the money that stays invested in a pension drawdown plan to provide further retirement benefits later such as a guaranteed income by buying an annuity.
- Subject to HMRC limits, it would be possible to continue to make contributions into a drawdown plan and receive tax relief. However, once income has been withdrawn from the plan this will be restricted to £4,000 per annum.
What Happens to the Pension Drawdown Plan if I Die?

When you die, any remaining fund in the pension drawdown plan will fall outside of your estate for inheritance tax purposes and will not, therefore, incur an inheritance tax charge. The income tax that a beneficiary would pay depends on the age at which you die.

If you die before age 75, your beneficiary or beneficiaries may be able to take the whole fund as a tax-free lump sum, or continue to draw from the fund as required under the income drawdown arrangement, also tax-free (but the income payments would not have to start straight away), or the fund could be converted into tax-free annuity.

If you die age 75 or above, money withdrawn by your beneficiary or beneficiaries, either as a lump sum or as income, would be taxable at their tax rate.

Is it Right for You?

Everybody’s circumstances are different. To discuss your individual requirements in more detail please feel free to contact us for an initial consultation, which can be by telephone or by a face-to-face meeting. There is no charge for a no-obligation initial consultation.

The value of your investments may go down as well as up and you may not get back the full amount invested.