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Income Pension Drawdown

There is an alternative to taking an annuity. This option is usually available for larger pensions. 

From age 55 rather than taking the 25% Lump Sum (pension commencement lump sum) and using the remainder the purchase an annuity, you may have the option to take the lump sum, leave the remainder invested without taking an income or start to draw an income from this remaining fund now.

This is a more complex area and definitely requires advice but is an increasingly more popular option for our clients.

This is commonly known as Income Drawdown or Income Release and the technical term is unsecured pension.

Unlike taking an Annuity income, Income Drawdown does not give you a guaranteed income to for the rest of your life. It may however provide you with a higher income than an Annuity subject to investment returns.

It must be noted that this is option is not suitable for all and is a higher risk option than a standard annuity, however it is worth speaking to a financial adviser who has the expertise to explain the how this type of plan works.

Can I just take the Tax Free Cash?

In most instances, if you have personal pension, you should be able to take the tax free cash without having to take the pension, however you existing provider may not have the facility to do this and you may need to move the pension to specialist drawdown/unsecured pension provider. This is not something you can do yourself and you must take advice.

This is a specialist area that we can advise you on.

Do I have to wait until I retire to take the lump sum?

No. If you have Personal Pension you can potentially take the Tax Free Cash from age 55. You don’t have to retire and you don’t have to take the income from the pension at this stage. Again this is an area in which you should always seek advice for a financial professional who can show you the upside and downside of this option.

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