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    Pension Annuities Direct

Drawdown Pensions & Drawdown Pension Rates

 

Drawdown has become more popular recently partly because of the downward trend in annuity rates. They enable you to take a pension income whilst keeping remaining funds invested. It can allow you to defer purchasing an annuity or become the basis of your pension income.

 

From 6th April 2015 there are two forms of drawdown pensions and the differing factor is the level of risk. Guaranteed Drawdown otherwise know as a Fixed Term Annuity provides guaranteed returns and is suitable for people who have a lower appetite for risk. Flexi-drawdown however enables you to keep your pension invested in the financial markets and may provide a higher fund growth but of course the risk is higher and the fund value is susceptible to movement in the financial markets   

Guaranteed Drawdown

The basic rules are:

  • You can normally take up to 25% tax free
  • You can set your own level of income
  • You decide how long you want to set the term of the policy
  • You are provided with a Guaranteed Maturity Value that you will receive at the end of the term.
  • You can provide full death benefits equivalent to the full value of the fund 
  • As you are not locked into an annuity at the end of the term you can start another pension product including another drawdown pension or an annuity. 

To understand the death benefits go to the bottom of this page

 

Guaranteed Drawdown Annuity Quote

Step 1 of 2

50%




  • How many years do you want guaranteed? From 3 Years **
  • ** 3 years = Guaranteed drawdown



  • eg. Value Protection

Points to consider:

Once you have agreed the basis of your fixed term annuity it is not normally possible to change. Some providers do allow these types of arrangements to be changed in the event of changes in health, marital status or death of a partner.

This product may not be suitable for you if you would like to:

  • Buy a product that offers a Guaranteed Income for life now
  • If you are likely to want to change your income during the term of the Fixed Term Annuity.
  • Believe that you could improve your pension funds performance through different investment routes in the future.
  • If one of the reasons you chose a drawdown product was to gain a better annuity rate in the future you may find that the annuity rates have fallen when you want to buy.

For more details go to our Fixed Term Annuity Page

Flexi-Drawdown

From 6th April 2015 Flexi- Drawdown enables 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. This can take the form of a regular income or a periodic payments. The remainder of the funds are invested in whatever manner you chose. 

This is a more complicated area and can carry a higher degree of risk therefore they will not suit the more cautious individual. For this reason, we recommend Independent Financial Advice be taken. We can assist in this respect through agreements we have with separate companies. Contact us for further information.

The basic rules are:

  • You can take your tax free lump sum (normally maximum 25%)
  • You can take as much or little income as you wish and manage your tax circumstances accordingly.
  • Your funds stay invested to enable you to manage the growth.
  • You can purchase an annuity at a later date, perhaps if you would qualify for an Enhanced Annuity.
  • The value of the fund can continue to be invested to provide future fund growth dependent on fund performance.
  • You can continue to invest up to £10,000 per annum in a pension and receive the appropriate tax benefits.
  • As you are not locked into an annuity you can convert it to another pension product at any time.  

To understand death benefits go to the bottom of this page

Points to consider:

  • If one of the reasons you chose a drawdown product was to gain a better annuity rate in the future you may find that the annuity rates have fallen when you want to buy.
  • The value of the fund could fall
  • Flexi-drawdown requires ongoing monitoring of the plan
  • Charges can be higher for this form of drawdown and there can be ongoing investment charges.

 Death Benefits of drawdown: 

From April 2015 pensions in drawdown are taxed differently depending on the age of death. There are different rates of tax for beneficiaries if someone dies before the age of 75 or after 75.

The nominated beneficiaries in most cases benefit from the full amount remaining in the drawdown pension. The nominated beneficiaries can include children and you could for example nominate your spouse to receive 80% and your children to receive 20% of your pension. Your spouse on their death can leave whatever is left of her pension (your old pension) to again any nominated person therefore your pension can be handed down through the generations until there is nothing left. To access the pension, once left to you there is no age requirement.    

The differences and options are highlighted below:

The options for someone who died less than 75 years old

  • Take the pension as a tax free lump sum. Any beneficiary can take the full value of their allocation of your pension tax free. They do not need to be over 55 years old.
  • They can continue to take a pension income from their own drawdown pension tax free again irrespective of their age.
  • They can take the remaining pension and convert it to an annuity, again this is tax free income as above. 

The options for someone who died 75 years or older

  • Take the pension as a lump sum. This is subject to tax and currently is taxed at 55% although there has been discussions about reducing the tax level to the beneficiaries marginal rate. Again this can be taken at any age.
  • They can continue to take a pension income from their own drawdown pension and this will be subject again to tax at the rate set by the government currently set at 55% but due to be reviewed. 
  • They can take the remaining pension and convert it to an annuity, again this is taxed at the rate set by the government currently 55% and again due to be reviewed 

These pensions are not subject to inheritance tax

For more information call or email us 

 

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