A new flexible friend

Withdrawing as little or as much income from your pension fund as you wish

Generating a retirement income has now become even more flexible. From 6 April, new rules were introduced to replace the previous pension drawdown arrangement which have now provided investors with greater flexibility and control over their pension options when they retire.

Qualifying for this option
Flexible drawdown is more flexible than the previous income drawdown, and if you qualify for this option it removes the cap on the income you could take. This will not be available to everyone and there are certain criteria that must be met before you can opt for it.
Flexible drawdown gives some individuals the opportunity to withdraw as little or as much income from their pension fund, as and when they need it. To qualify, 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. The same rules apply to dependants who elect flexible drawdown.

Secure pension income
If pension contributions have been made to any pension in the same tax year or if you are still an active member of a final salary scheme, it isn’t possible to start flexible drawdown. Once in flexible drawdown, it isn’t possible to make further pension contributions.
A secure 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.

Did you know?

The effective compulsion to buy an annuity by age 75 has ended

You now have more flexibility to defer taking a pension and tax-free cash payments post age 75

Capped drawdown – this option enables you to draw an income for life, with an annual limit, without having to purchase an annuity

Flexible drawdown – if you have a secure income of over £20,000 per annum you will not be subject to
limits on the income you take from your drawdown

There has been an increase in the tax payable on lump sum death benefits from drawdown

Flexibility and control over your pension
These new rules, with the exception of the increased tax on death payouts, could benefit those who do not want to buy an annuity by age 75 or who want more flexibility and control over their pension.

However, the majority of people may still want to purchase an annuity in retirement, because it enables them to secure a guaranteed income in retirement.

The fund value of a flexible drawdown arrangement may fluctuate and can go down as well as up. You may not get back your original investment. Past performance is not an indication of future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts.