Income Drawdown Calculator

Income Drawdown Calculator and Income Limits


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Income Drawdown Calculator and Income Limits

Income Drawdown CalculatorYou need an income drawdown calculator to determine the maximum amount you can earn per month. Once your pension matures, you have the option to withdraw 25% of the total amount in tax-free cash. The remaining money is to be invested in either annuities, income drawdown or alternative sources. Government Actuary Department (GAD) rules emphasise the fact that there is a maximum monthly income amount. An income drawdown calculator will enable you to keep your investment under this limit.

A Viable Alternative?
As annuity rates are at such a low level, thousands of people with maturing pensions are considering income drawdown as an alternative. The maximum income you can withdraw is dependent on the amount you would receive from a regular annuity with a tax charge of 35% also applicable. There are a host of different options with income drawdown but it all gets very complicated which is why an independent financial advisor is needed in order to help you choose the right option.

There is no minimum monthly limit when it comes to income drawdown with the maximum level often placed at 120% of a person’s pension. This pension figure is calculated according to exceedingly complicated GAD tables. To use an income drawdown calculator, you need to enter some basic data about your pension. Simply enter the value of your pension, the amount of money you withdrew tax-free, and your age. This should immediately result in a table popping up explaining the maximum monthly and annual allowance for men and women. For example, a 61 year old man with a £500,000 pension who has withdrawn £100,000 in tax-free cash has a monthly limit of £2,480.

This is of course, a very simplistic method of finding out your income drawdown limit. Nonetheless, it is a convenient tool and will give you a starting point when you discuss your options with an independent financial advisor, which is recommended. Fill in our form to find out more about an income drawdown calculator and more about your investment options.