Retirement Options

Flexi-Access Drawdown

The first of the new options is ‘flexi-access drawdown’, which, in essence, places no limit on the amount of income you can take from your pension fund. This means that it would be possible to take the whole of your pension fund in one go, although it may not be tax efficient to do so.

You will be able to take 25% of your fund as a tax-free lump sum (if you have not previously used that fund for drawdown purposes), with the remainder of the fund staying in your pension to provide you with an income. If you will be dependent on your pension to support you through your lifetime, you may need to consider taking a lower level of income to sustain you.

It is important to remember that the amount of flexi-access fund withdrawn to provide you with an income will be taxed at your marginal rate of Income Tax. If you take too much income, this may move you into the next tax bracket and result in you paying a higher rate of tax.

Income drawdown carries significant investment risk, as your future retirement income remains totally dependent on your pension fund performance. You should remember that if you access your tax-free cash early, the benefits will be less than if you wait until your planned retirement age. Therefore, this option is only suitable for a limited number of people.

No Obligation Consultation
Retirement Option
Retirement Options

Pension Lump Sum

A new option called the Uncrystallised Funds Pension Lump Sum (UFPLS) allows you to take a one-off payment from your pension or a series of lump sums, leaving the remainder of the fund in your pension invested. The first 25% of each UFPLS is tax-free, with the balance subject to tax.

UFPLS is not available from any part of your pension that is already in drawdown.

Taking a UFPLS will trigger the restricted annual allowance – the Money Purchase Annual Allowance (MPPA) of £4,000.

No Obligation Consultation

Capped Drawdown

If you are currently in capped drawdown, you will have a maximum level of income that you can take each year. This is reviewed every three years up until you are 75 and annually thereafter.

As of 6 April 2015, you can either continue taking capped drawdown or take advantage of the new flexi-access drawdown, whereby the amount of income you can take will be unlimited, and there will be no further maximum income level reviews.

It is important to remember that if you make the decision to move from capped drawdown to flexi-access drawdown, the amount you can contribute to your pension each year will change. The £4,000 annual allowance is triggered when you take your first income payment from the flexi-access drawdown arrangement.

No Obligation Consultation
Capped Drawdown

Flexible Drawdown Pension

Anyone currently taking flexible drawdown should have been automatically moved into flexi-access drawdown on 6 April 2015. This will have no effect on how you take benefits but will enable you to make tax-relieved contributions to your pension up to the Money Purchase Annual Allowance (currently £4,000 a year).

New death benefit rules

You can nominate someone to receive your death benefits – be it your spouse, children, grandchildren or even someone unrelated to you. You can also leave some or your entire pension fund to charity.

The beneficiaries of your pension fund can elect to take the fund as a lump sum or leave the fund invested and take an income under the new flexi-access drawdown rules. If they do choose the flexi-access option, they can take income as and when required or leave the funds invested.

No Obligation Consultation
Flexible Drawdown Pensions
Bereavement Benefits

Bereavement Benefits

The tax treatment of your death benefits will depend on two things:

  • Your age when you die
  • Whether or not the funds are designated to your beneficiary within two years
  • If you die before your 75th birthday and your pension funds have been designated to your beneficiary within two years, they will be paid tax-free. However, if the beneficiary decides to take the pension as a lump sum, it will need to be paid within the two-year period to remain tax-free. If the beneficiary chooses to draw down the pension, it doesn’t need to be taken within the two years, but the administrator of the pension must be notified of their intention to draw an income.

    No Obligation Consultation

Lump Sum Death Benefit

If you live beyond your 75th birthday, or if you die earlier, but your pension funds are not designated within the two-year period, then the death benefits will be taxed – typically at the beneficiary’s marginal rate of Income Tax. The only exception to this rule is if they choose the lump sum option, and this was paid before 6 April 2016 (in which case it will be taxed at 45%).

If your beneficiary has not withdrawn the whole of the pension fund before their subsequent death, then the pension funds can be passed on again by your beneficiary.

It is possible to have unlimited successors meaning, in theory, that your pension fund could be passed on for generations if it is not all withdrawn.

No Obligation Consultation
Lump Sum Death Benefits

Purchasing An Annuity

You will, of course, still have the option of purchasing an annuity. For some people, this may still be the right choice as it provides a guarantee of an income for life.

Please note that whilst every effort is made to ensure that the information contained within this explanation is correct, these notes are by necessity brief and of a generalised nature. We would provide specific personalised advice prior to finalising any arrangement.

The value of your investments and any income from them can fall as well as rise, and you may not get back the amount you originally invested. It is important to note that not all personal pensions allow the facility to self-invest, and you should check the details of your existing pension if this is a requirement.

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.

Tax concessions are not guaranteed and may change in the future. Tax-free means the investor pays no tax.

No Obligation Consultation
Purchasing an Annuity
nick green
<p class="team-pop-title"Peter Blacklock

peter@fatgreen.co.uk

0333 050 0088

07866 751 415

Connect with Peter on LinkedIn

Peter Blacklock
Peter is one of the UK’s leading Insurance and business advisory specialists with a track record of building and selling Insurance businesses.

He advises boards and investors in the capacity of CEO, C.A.P.O.W. Consulting, drawing on three decades of experience. Peter’s knowledge of Insurance is unrivalled having had extensive exposure to personal, family and business protection insurance.

Peter is passionate about the North of England and a life-long Sunderland fan and sports coach.

nick green

Anny Lian

anny@fatgreen.co.uk

0333 366 0988

07908 355 781

Connect with Anny on LinkedIn

Anny was an Investment Banker and CFO of a high-growth company working across Asia, America and now Yorkshire.

With a background in Finance, Anny understands the importance of financial planning and the value of saving and investments while putting together optimal protection plans for businesses, families and individuals.

Anny is also passionate about empowering women financially and boosting women's financial confidence and financial literary.

As an active member of the UK SME sector, Anny accepts invitations to encourage and mentor aspiring future female business leaders.

nick green

Nick Green

0333 366 0988

Connect with Nick on LinkedIn

Nick is the Practice Lead for C-Suite and Private Equity with Nigel Wright, a leading recruitment agency.

At heart, Nick is an entrepreneur who has co-founded two companies, including Fatgreen. Fatgreen arrange Business Protection insurance solutions for SMEs, Private Equity and Venture Capital Investors.

Prior to co-founding Fatgreen, Nick spent two decades in Executive Search, providing recruitment solutions for Investment Banks, Private Equity firms and their portfolio companies. Having dealt with people all his career, he understands the intrinsic link between creating financial value and people.

    Contact me regarding... Retirement Options

    Tick this box if you want your details to be stored on our database, which may then be used for marketing purposes.

    Fields marked with an * are required.

    For more details on how we handle your data, please view our Privacy Policy

      Contact Us Today

      Tick this box if you want your details to be stored on our database, which may then be used for marketing purposes.

      Fields marked with an * are required.

      For more details on how we handle your data, please view our Privacy Policy

        Contact Us Today

        Tick this box if you want your details to be stored on our database, which may then be used for marketing purposes.

        Fields marked with an * are required.

        For more details on how we handle your data, please view our Privacy Policy