Flexibility

Income security, growth and flexibility. There is the potential for income growth, but no guarantee, and your income could fall. You choose how much income you need for the first 5 years, within Inland Revenue GAD limits, as set out in the previous section.

At the end of the 5th year (and every 5th year thereafter), the Inland Revenue limits are re-set and you choose again for the next 5 years. You can vary the amount of income withdrawn each year, up to the maximum limit. Additional one-off income withdrawal can be taken each year (subject to the total withdrawals not exceeding the maximum limit for the year). You can decide when to convert to an annuity, though you must do so by age 75.

Investment flexibility. Income drawdown is an investment product with huge investment flexibility. There are sensible Regulatory restrictions, due to the very real investment risks.

Death benefits and inheritability. If you die before you convert the fund into an annuity, a 35% exit tax is levied on the remaining fund before it is paid into your estate. Alternatively, your spouse can elect to continue with the income drawdown arrangement, or buy an annuity with the fund.

Tax efficiency. You can choose to take no income to keep the income tax liability down in some years (and also to preserve the fund balance for the spouse). In most cases, you should be able to pass the fund to your heirs inheritance tax-free (though remember that there is a 35% tax charge before it passes to your estate, and from there to your heirs).

Once again, many thanks for arranging the Pension fund transfer so smoothly. Look forward to hearin...
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