Pension Drawdown is a term used to describe a way of taking pension benefits without buying an annuity. The Pension fund stays invested, with returns dependent upon pension investment growth and charges applied to the plan. Tax free cash and where required a regular income can be drawdown from the scheme. The term Pension Drawdown was first used to describe Capped Drawdown. Capped Drawdown was introduced in 1995 as an alternative to purchasing an annuity at retirement, due to concerns over low annuity rates. Capped Drawdown allowed you to take your take free cash and an income calculated to be broadly similar to that you may receive from an annuity. Capped Drawdown does not allow you to withdraw income or capital above that calculated to be broadly equivalent to an annuity. In recent years, Capped Drawdown has been superseded by Flexi-Access Drawdown and Uncrystalised Fund Pension Lump Sum (UFPLS) which provide greater flexibility.
Flexi-access drawdown has been available since April 2015. It is a form of Pension Drawdown that allows full tax-free cash to be taken, without buying an annuity. The rest of the money stays invested in the pension. Unlike its predecessor Capped Drawdown, full access to the remaining pension pot is available with Flexi-Access Drawdown. This can be withdrawn in full or in part at any time, and is taxable as income. In this form of Pension Drawdown, it is common for a monthly sum to be drawn from the plan to fulfill retirement income requirements. Flexibility remains to take lump sums when required.
Flexi-Access Drawdown is a Drawdown pension that provides access to capital and control over the level of income paid as a pension.
This Drawdown Pension option provides much greater freedom and access to capital than other forms of Pension Drawdown. However, it doesn’t provide a guaranteed income in retirement.
Flexi-Access Drawdown is suitable for certain people but unsuitable for many. Obtaining the right Pension Advice is essential for anyone considering Flexi-Access Drawdown.
The Chatsworth Practice Pension Advisers provides a detailed report analysing the risks and benefits of all options at retirement. Our Pension Adviser look at what you are trying to achieve and recommend the best course of action. Where Pension Drawdown is considered appropriate our Pension Adviser can arrange it from your existing pension if available or advise upon and set up a new scheme.
A Drawdown Pension requires ongoing pension investment. In many cases the success of Flexi-Access Drawdown depends upon how well the pension is managed. Our Pension Adviser offer a comprehensive ongoing management service to help facilitate this.
Uncrystallised Fund Pension Lump-sum (UFPLS) is a form of Pension Drawdown that allows lump-sum withdrawals from a pension plan. 25% of each lump-sum is tax free. 75% of each lump-sum is taxable as income. It is sometimes possible to take a UFPLS payment each month to fund retirement income needs. This can be a tax-efficient way to receive pension income because 25% is tax free.
Where flexi-access drawdown or UFPLS is most appropriate Drawdown pension for a client’s needs we advise how this can best be achieved. We recommend the best way forward, consider taking a drawdown pension or UFPLS from client’s existing schemes if available and also consider the benefits of transferring to a new scheme. We arrange for pensions to be put in flexi-access drawdown or UFPLS in the best way possible.
Client’s in Pension Drawdown often need on-going pension management. Our Professional Management Service ensures their plan remains invested in line with their objectives, attitude to risk and to best advantage.
The Chatsworth Practice is a Trading name of The Chatsworth Practice Limited which is an appointed representative of 2 Plan Wealth Management Limited. It is authorized and regulated by the Financial Conduct Authority and is entered on the FCA register under reference 494796.
The Chatsworth Practice Ltd is registered in England and Wales registered number 05974782. Registered office 5th Floor, Waverley House, 115 – 119 Holdenhurst Road, Bournemouth, Dorset, United Kingdom, BH8 8DY