In brief
Take a tax-free sum now, taxable income when it suits you and benefit from any stock market rises or investment growth.
Income drawdown involves taking an income direct from your retirement fund instead of buying an annuity. (Although, you'll still have to buy an annuity or transfer to an alternatively secured pension when you reach age 75.) Your pension fund remains invested, allowing you to benefit from any investment growth, and you take an income from it. The good thing is that you control when you take your income, how you take it, the amount you take and where your fund is invested. You can also choose to take a tax-free lump sum - for most people this is up to 25% of the total value of pensions savings that can benefit from tax relief, subject to a maximum of 25% of the standard lifetime allowance.
Our self-investment option offers you a choice of over 1,200 funds, discretionary fund managers and specialist property solutions.
However, there are some drawbacks to income drawdown:
- While the rest of your fund remains invested, it may grow. However, if the stock market falls, your fund value might fall. Annuity rates can also vary over time and potentially you could end up with a lower pension than if you'd chosen the traditional annuity route.
- There is a maximum limit to the amount of income you can take from your fund, which the Government Actuary's Department (GAD) sets.
Income drawdown frequently asked questions
Combination
You can combine phased retirement with income drawdown to give you maximum flexibility.
Further information... Who should I talk to?
Speak to your financial adviser to find out more. If you don't have an adviser, the IFA Promotion Service or the Society of Financial Advisers can help you find one.
