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…
flexible, tailored funds...
...for your future financial plans
The Pension Drawdown Company specialises
in providing advice on all aspects of pension
drawdown and investments
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11 March 2010
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Pension DrawdownThe RulesOn transferring to a Pension Drawdown (USP) plan, you can immediately take a tax-free lump sum of 25% of the fund value and then take an income from the invested fund up to a limit prescribed by the Inland Revenue. In some instances you may be able to obtain more than 25% tax-free cash from some occupational pension schemes depending on your length of service and salary. There is no limit to this entitlement and it is possible that you may be entitled to the whole of your fund value as tax-free cash. If the tax-free cash entitlement is substantial it may need to be protected before 5th April 2009. It is not compulsory to take any tax-free cash and you can take less than 25% if you wish. However the tax-free cash must be taken at the time that the plan is set up. Unlike an Annuity (a Secured Pension) you do not have to take any income. The maximum annual income that you can take is set by the Government Actuaries Department (GAD). You can, therefore, take any level of income between zero and the maximum on a yearly basis. You can vary this income at any time, meaning that one year you could take nothing at all and the next the maximum. Every five years this maximum level has to be reviewed and can increase or decrease depending on a combination of the fund value, your age and the GAD rate at that time. It is also possible to request annual reviews at the instigation of the member. Investment of your fundsThe pension fund that remains after taking tax-free cash is invested in any investment fund that is offered by the provider of the plan. These funds are likely to cover all investment markets and will include both funds managed by the provider itself and also external funds such as unit trusts. These funds will cover all investment classes, i.e. UK equities, both growth and income, overseas equities, commercial property, fixed interest, corporate bonds and gilts. The funds can be changed (switched) between any of the funds that are available and with many providers at no cost. Therefore the selection and managing of your investment funds within the Drawdown plan is just as important as selecting the right plan and provider at the outset. Before investment funds are recommended your “Attitude to Investment Risk” is ascertained, which would determine whether you were a Cautious or Adventurous investor, or anywhere in between. Any recommendation that we make would be in accordance with this. |
I have known Jonathan Walker for very many years and have a great admiration for the effort and diligence he applies to any work he undertakes ... click here for more
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