Drawdown

Pobby

I womder if any kindly soul could direct me to a thread explaining how this works as a way of receiving a pension?Thanks.

EdInvestor

Hi Pobby

There's a monster and rather acrimonious thread stickied at the top about drawdown which might help.

Basically you move the pension to a SIPP ( choose a low cost online one) first, then take the 25% tax free cash and then put the rest of the fund into "drawdown" (Since A day, for various reasons, it's best to choose the type called "phased drawdwon").

You then invest the money and take an income from it.The max income allowed is 120% of the maximum annuity available for a person of your age, but you can vary the amount below that as you like.You can take the income annually,monthly whatever. It's taxed, same as an annuity.

Every 5 years they take a look at the fund and adjust the amount of income you can take according to your age (it gets higher) gilt yields (who knows) and the size of your fund (depends on the markets and how good an investor you are.)

When you get to be 75 they reduce the amount you can take out as income ( but we suspect this rule might not last for long).At least you don't have to buy an annuity any more

If you die before you're 75, your beneficiary can take your drawdown fund in cash after a 35% tax charge.It's separate from your estate, so no IHT. After 75 it's horrendously complicated.

Skarab

EdInvestor wrote:

You then invest the money and take an income from it.The max income allowed is 120% of the maximum annuity available for a person of your age, but you can vary the amount below that as you like.

Could the amount being "drawndown" be zero? i.e. Could one take the 25% cash and leave the rest to continue to (hopefully) grow?

Debt_Free_Chick

Skarab wrote:

Could the amount being "drawndown" be zero? i.e. Could one take the 25% cash and leave the rest to continue to (hopefully) grow?

Nope - the cash option is only available at the point the pension is paid - whether that's via an annuity or drawdown

claretmatt

Posted by Skarab
"Could the amount being "drawndown" be zero? i.e. Could one take the 25% cash and leave the rest to continue to (hopefully) grow"

After the 6th April you are allowed to take tax free cash from certain plans with no obligation to take an income.

EdInvestor

Skarab wrote:

Could the amount being "drawndown" be zero? i.e. Could one take the 25% cash and leave the rest to continue to (hopefully) grow?

Yes. Under the new A day rules there is no requirement to take any income when the fund is in drawdown. If you choose the "phased drawdown" option and leave a small amount of the fund "unvested", you can even continue to make contributions.