Pension Drawdown Milton Keynes
Flexi-access Drawdown (FAD)
Under the option of FAD you can choose to immediately take 25% tax free cash from your pension plan. Instead of buying an annuity with the remainder of the fund, the money remains invested and can continue to benefit from investment performance in a tax-efficient environment. There will be no limit on the income taken.
After you have taken your entitlement to the tax free lump sum at outset, you can choose to take as much or as little of the remaining pot as you wish and it will be added to any other income you have in that tax year to determine the income tax rate that will apply. Please note that if you draw any income from this pension plan, your future money purchase pension contributions will be limited to a £10,000 maximum Annual Allowance.
As the rest of your pension fund remains invested in a tax-efficient environment, your final pension - and the income you may withdraw each year - will be determined by the continued investment management of your funds. Careful attention, therefore, needs to be given to investment management in the Flexi-access Drawdown pension plan to try to ensure that your income can continue for as long as possible and, if you do finally buy an annuity, you would be in a similar situation to that if you had bought an annuity at the start.
You are able to vary your income each year and the level of income you choose to take will have an effect on the value of your invested fund which will influence both future levels of income as well as the amount of any annuity income you may choose to buy.
Whilst in the short term many clients wish to consider drawing large amounts of income from their funds, in the medium to long term, it is important that you balance your income requirements with the investment policy to ensure the annuity purchasing power of your pension fund is maintained.
With this type of contract (together with the UFPLS option shown below):
- (1) The capital value of the pension fund may be eroded;
- (2) The investment returns may be less than those shown in the illustrations;
- (3) Annuity or scheme pension rates may be at a worse level in the future;
- (4) When large amounts of income are taken or the maximum short-term annuity is purchased, high levels of income may not be sustainable.
- (5) Benefits are means tested by the DWP.
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