Income Drawdown (also known as an unsecured pension) allows you
to take income from your pension fund while the fund remains
invested and continues to benefit from any fund growth. You
generally need a substantial fund value to take income drawdown.
The amount of fund varies according the rules of the pension
provider, but is around £100,000.
Changes From 6 April 2011
New Income Drawdown rules were introduced from 6 April
2011. This page contains information relating to those new
rules.
Income Drawdown Plans In Place Before 6 April 2011
If you started an Income Drawdown plan before 6 April 2011, you
will have to convert to the new rules, or purchase an
annuity. There are transitional rules in place, giving you a
deadline to do this. Click here to read our factsheet on these
transitional rules.
What are the new income drawdown rules?
The new income drawdown rules are as follows:
- There is no minimum amount of income that must be drawn,
irrespective of age. This means that individuals may be able to
leave their pension fund untouched for as long as they like,
without the necessity to drawing any income.
- The maximum amount of income that may be drawn is reducing. The
new maximum amount of income that may be drawn is 100% of the
single life annuity that somebody of the same sex and age could
purchase based on Government Actuary's Department rates. An
individual's pension provider calculates the maximum income, using
standard tables prepared by the Government Actuary's Department
(GAD). Click here to view the GAD tables.
- The maximum income will generally be reviewed every three years
until age 75 and annually from age 75, based on the Government
Actuary's Department rates for an individual of the same age at the
time of each review.
- Tax-free cash lump sums may now be paid after age 75 where an
individual has elected to set aside or 'designate' funds for income
drawdown at the same time, even if they decide to take no
income.
If you are considering using income drawdown or delaying taking
your tax-free cash lump sum and starting your pension after age 75,
please check whether your pension provider is offering these
options. If you are considering income drawdown, you should seek
expert independent financial advice. The Pensions Advisory Service
is unable to give financial advice.
Flexible Drawdown
Flexible drawdown will allow some individuals the opportunity to
withdraw as little or as much income from their pension fund, as
they choose, 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.
Click
here to read more about Flexible Drawdown.
Q & A's
No. It will be left to each pension provider to decide whether
or not they wish to provide income drawdown.
Yes. The rules on this have not changed.
Our understanding is that any new proposals would be introduced
on 6 April 2011.
There are a few different ways that payments could he made on
the death of the scheme member. Please see our fact sheet
'Spotlight on tax and lump sums paid on death - Income Drawdown'
which is found on the publications
section of our webpage.
