How Safe Is Your Pension
Defined Benefit, or Final Salary Schemes, in the UK have a collective deficit of £253 billion as at the end of March. This is reported by the government sp…
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11 March 2010
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Pension DrawdownHow does it work?Pension Drawdown plans are also sometimes referred to as Income Drawdown, Income Withdrawal, Pension Withdrawal or Pension Release. Since 6 April 2006 the official name for this type of plan is Unsecured Pension (USP) and it allows you to take benefits from your pension funds, from age 50 onwards, without immediately buying an annuity. Taking the benefits from your pension before the normal retirement age of 60 or 65, is sometimes referred to as “unlocking your tax free cash”. Some people want to unlock their tax free cash early to use the funds to clear debts or repay a mortgage and the present rules allow you to do this from age 50. However this age limit is going to rise to 55 from April 2010, so if you intend, or need, to access your tax-free cash you need to take action sooner rather than later. You do not have to stop work in order to take your benefits. You must bear in mind though, that by taking the tax-free cash (and any income) early you are reducing the funds available for when you retire. From the time of taking benefits (known as crystallizing your fund) until you reach 75 you can use Pension Drawdown to take both tax-free cash and an income. The fund remaining after taking tax-free cash is still invested as a pension fund, continuing to benefit from a tax efficient environment in the same way that it did prior to taking any benefits. You can take benefits from both Protected and Non-Protected Rights |
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