Contact Form
Phased Retirement & Income Drawdown
Phased Retirement & Income Drawdown - please fill in this short form now >
So, you’re approaching retirement but you don’t want to commit to buying an annuity because the rates aren’t competitive or more likely in the current economic climate, the value of your Pension Fund has fallen. If you commit to Annuity Purchase now, you will be living with the impact of that loss for the rest of your life. Where your Pension Fund is of a reasonable size ( usually a minimum of £100,000 after tax free cash) and other factors including your personal circumstances and attitude to investment risk have been taken into account, the Phased Retirement/Income Drawdown option may be suitable for you.
Phased retirement is a personal pension plan which accepts existing funds and allows you to buy an annuity or income drawdown in stages rather than all at once. Each year you decide how much income you need. You then cash in as much of the plan as necessary to provide your chosen level of income. Please note that the value of the remaining fund can go down as well as up and is not guaranteed, and that annuity rates can vary over time. So you could end up with a lower pension than if you'd chosen a conventional annuity straight away. You can take out a phased retirement plan any time after the age of 50 (55 from April 2010).
How does it work?
Think of it as lots of mini-retirements spread out over a number of years. At first your income will consist of a tax-free cash sum and income from either an annuity or an Income Drawdown plan. You'll continue to receive income from these sources, but you also have the option to take another tax cash-free sum and set up further Income Drawdown plans or annuities. Usually on or before your 75th birthday, you must convert any remaining retirement fund into an annuity.
Phased Income Drawdown or Phased Annuities?
This depends on your circumstances and attitude to risk. Drawdown provides greater flexibility and a higher potential income, but annuities, being guaranteed, give greater security. Phased retirement is a relatively complex arrangement so charges are higher than if you'd chosen the traditional annuity route.
Who could it be suitable for?
Phased retirement can be taken out by people aged between 50 and 70 (from 2010 the lower age will be 55). It could be just the thing for you if:
- You want to vary your income from year to year to reflect changes in your circumstances.
- You want your pension fund to continue to benefit from potential growth and are prepared to accept the risk that its value may fall rather than rise and is not guaranteed.
- You have other sources of income so you may not need a high income in the early years of retirement.
- You want to attempt to maximise the benefits your family receive on your death and give them maximum choice about how they receive these benefits.
01732 881188 - Phased Retirement & Income Drawdown
© Copyright Pension Zone