Income Drawdown question

charlotte_rose

when you enter income drawdown and your pension funds are in dividend paying shares, do the dividends form part of the pension pot or paid out on top of your annual drawdown income?

dunstonh

They remain in the pension. Either paid into the cash account or reinvested depending on your standing instruction.

BLB53

As I understand it, the value of all the shares added together plus any accrued dividends not reinvested at the time of conversion is the pension 'pot' and this amount is used to determine the maximum you can withdraw under drawdown according to the GAD rules.

The income generated in the form of dividends after moving to drawdown can be either withdrawn or reinvested if surplus to requirements.

The DIY Pensions book mentioned on Monevator last week deals with income from drawdown so may be worth a read
http://www.amazon.co.uk/D-I-Y-Pensions-ebook/dp/B00B7QN8XM/ref=sr_1_1?s=digital-text&ie=UTF8&qid=1361959856&sr=1-1

also the pensions advisory service may have some info

http://www.pensionsadvisoryservice.org.uk/annuities-and-income-drawdown/income-drawdown-plans

not-so-civil

I took SIPP Drawdown last June. My Sipp contains 2 parts. The first is my Portfolio whilst the second is Cash. All dividends are paid into the Cash from which I draw monthly amount (less tax) - just like a payroll. It is up to me to monitor and rebalance as necessary to maintain sufficient funds to cover outgoings.

mania112

Dividends in a pension are a nonsense.

You're still limited to how much you can withdraw if it's in payment.

You can't personally receive the dividends (or any other payment) if you're pre-retirement.