Welcome to the Income Drawdown Section!
When approaching retirement and thinking about income drawdown it is important to look at all the factors. Look into death benefits, flexible drawdown, new rules, comparisons with annuities, tax free cash, the best providers, and IHT.
If you take an annuity young (especially early retirement) income may be much lower than if you went into Drawdown and took the annuity older. There are also inheritance tax benefits to drawdown. As with all investment decisions you must balance risk and reward . Income from drawdown is at the mercy of fund performance. ID is normally only appropriate if you have £100K+ in your pension pot.
If you have a pension that is worth less than £18,000 now or £15,000 from April 2017, (1% of the £1.8 million Lifetime Allowance which is to change in 2017 to £1.5 million) there is the chance you will be allowed to withdraw the entire amount in a single lump sum. All pension savings are included in this amount though state pensions are not. There are a host of regulations involved when trying to withdraw this money including:
- You must be over 60 but under 75
- You must take all trivial benefits within one year
- Only 25% of this payment is free from income tax
Occupational pension scheme trivial payments may be paid on a separate basis with a set of alternative rules. Those who fall into the above category will probably not have enough money to go into drawdown.