Flexible Drawdown will allow some individuals the opportunity to
withdraw as little or as much income from their pension fund, as
they choose and as and when they need it. You have to declare
that you are already receiving a secure pension income of at least
£20,000 a year and have finished saving into
pensions.
Secured pension income
Secured pension income means:
- A company pension being paid to you either from the UK or from
Overseas; or
- An annuity being paid to you (from a personal pension or
company pension) either from the UK or from Overseas; or
- A state pension being paid to you either from the UK or from
Overseas.
Our understanding is that secured pension income is taken as the
gross annual amount of pension (i.e. before any income
tax is deducted). The requirement to have a secure pension income
of £20,000 might change in future to increase the level of
income required.
Q & A's
No. Income drawdown is not regarded as secured pension income
for this purpose. Short term annuities are not secured pension
income.
In addition to meeting the requirement to have a secured pension
income of £20,000, the conditions you have to meet are as
follows:
- You make a valid declaration to the pension provider that you
meet the flexible drawdown rules; and
- No further contributions are made by you or on behalf of you to
a defined contribution scheme; and/or
- You are not building up further benefits in a defined benefit
(or cash balance) scheme.
In effect, any new pension savings made after flexible drawdown
is taken will be liable to the annual allowance charge (i.e. income
tax at your marginal rate of tax).
No. Protected rights funds (i.e. money from contracting out of
the State Second Pension and the State Earnings Related Pension
Scheme (SERPS)), cannot be used to draw a flexible income. However,
protected rights are expected to be abolished on 6 April 2012 which
will effectively remove this restriction.
Yes, if you meet the conditions for flexible drawdown and your
pension provider allows you to do this. Please see our fact sheet
'Spotlight on the new income drawdown rules for individual's
already using income drawdown'.
Please check with your pension provider as to whether you can
use flexible drawdown and if so, when.
Yes. The same rules apply to dependants.
Yes. The flexible drawdown amount will be subject to income tax
in the same way as other pension income.
No. It will be left to each pension provider to decide whether
or not they will allow this.
