Income Drawdown
June 22nd, 2008
Are you looking for a degree of flexibility in retirement? Then income drawdown may be the answer.
For many, retirement planning is all about saving for when they have finished working and using the money to buy an annuity, but there are other options. Here we look at why you should buy an annuity straight away when you retire, but what options are available to you if you don’t want to do this?
There are ways of taking some money out of your pension fund without having to use the rest to buy an annuity, such as income drawdown plans, also known as unsecured income arrangements.
They are most effective if you have a pension fund worth £100,000 or more and add the flexibility to your retirement planning that buying an annuity can’t offer. You have the ability to take 25% of the value of your pension fund as tax-free cash, and providing you are willing to add a degree of risk to your retirement planning, you can leave the rest invested with the prospect of further, long-term growth, up until you reach 75.
Once you have entered into a drawdown plan, you have control over the funds the remainder of your pension is invested in, allowing you to make changes as and when you need to.
And if you decide to take an income from the plan, it allows you to be flexible and vary the amount of income you take.
Many of our clients who have come to us looking to add flexibility to their retirement planning, find income drawdown offers them the chance to make some sweeping changes to their lives and gives them options they never had before.
See our case study below to find out how one of our clients benefited from income drawdown. Of course, income drawdown is not a product that will benefit everyone so you must seek advice. To speak to one of our specialist
retirement planning advisers, call 0800 294 7191 or complete this form.
Income drawdown - case study
At age 51 Chris Long had recently changed jobs after 25 years service with one company and was hoping to retire at 60. He had built up a substantial pension pot in his previous employer’s final salary scheme, but this had been frozen after 22 years service and wouldn’t be available until the age of 65.
“I’d decided long ago that I want to retire when I’m 60 instead of working until 65 – there are so many other things I want to do with my life that don’t involve working for someone else. So I did some digging to find out if there were options available that would allow me to take control of the money in my pension fund. I had already heard of income drawdown and was aware that I could take 25% tax-free cash before I came to Torquil Clark for financial advice.
I had never used an independent financial adviser before and it was a bit of a daunting prospect. But what came across to me immediately was that I could trust this person - and that’s essential, because to get the most out of them you have to share as much information about your circumstances as possible.
I found my adviser at Torquil Clark showed a great deal of understanding of my life expectations and aspirations, which made me feel very comfortable.
It is important to express your aspirations even if you believe they are unobtainable as they may actually be possible to achieve! Working with an adviser isn’t just a question of having all of the pros, cons and technical pensions jargon explained. I found it gave me the confidence to say ‘let’s do it’.
As a result, I’ve been able to take my tax-free cash to use as I want and I’ve got control over the rest of my pension fund, with the potential for it to grow until I am 70.
As I am still working and enjoying my new job, I can save or invest the income generated from the drawdown plan until I need it; but if that changes I know I don’t have to continue in a job I’m no longer enjoying. It’s really enabled me to make some exciting changes to my lifestyle and given me choices that weren’t available to me before.”
To speak to one of our specialist retirement planning advisers, call 0800 294 7191 or complete this form.
This article appears in our client bulletin, published Summer 2008.
