Some people are currently in Capped Drawdown plans in which they have reviews every three years and the income they receive is altered accordingly. There are many benefits in being in a Capped Drawdown plan, however if you require more income than the plan will give then one can switch to a Flexi Access Drawdown plan and increase your income. Be advised if you do this you cannot switch back into a Capped Drawdown Plan later.
No new Capped Drawdown Plans are available. All that is available is Flexi Access Drawdown plans currently.
A Flexi Access Drawdown Plan at retirement is the recipient plan for all of your personal pension policies pre retirement (assuming that you did not wish to purchase an annuity) and this is where you will receive your Tax free Cash otherwise known as Pension Commencement Lump Sum (PCLS) and your income or access to the main fund or collective fund (collective meaning if funds from more than one pension plan were transferred in at the time).
The aim of the drawdown fund is to achieve capital growth if no income is taken, cover the cost of the income and achieve some capital growth if income is taken and also to provide both income flexibility and since the introduction of pension freedoms in 2015 access to the actual fund if necessary, but this will erode the fund and reduce the long term income.
From a risk point of view a Flexi Access Drawdown plan is a higher risk than purchasing an annuity so if you are risk adverse or low risk based on your attitude to risk or have a low capacity for any loss or fund fluctuation then an annuity may suit you better.
To see if this is the best route for you then fill out the simple contact us box below and press send and we will be in touch.
Reasons to Look at Flex Access Drawdown
There are many reasons why someone may want to have a Flexi Access Drawdown Plan and below are a few reasons why someone might wish to consider this option.
- You are age 55 or over and wish to have your Tax free Cash from some or all of your personal pensions, but do not require any income currently and wish for continued fund growth and income options if required.
- You are age 55 or over and wish to have your Tax free Cash from some or all of your personal pensions, continue working but do require income currently.
- Having taken your tax free cash you wish to take ad hock income occasionally but in the mean time fund growth.
- You want to take your Tax Free Cash and access the main fund and withdraw some of that also which will be net of tax.
- You are at your desired retirement age, want the Tax free cash and a monthly income, but do not wish to tie the fund up in an annuity.
- You are at your desired retirement age, not married, require an income and wish to leave the fund to a beneficiary on your death who in turn can leave it to a nominated beneficiary beyond that.
- You do not want to purchase an annuity.
- Annuity rates may be poor and not good value for money and may wish to retire and delay the purchase of an annuity until another day when they are better value.
- Your health is not very good and your life expectancy may not be very long and you wish to leave your fund to your spouse, but in the short term require an income.
- You have other retirement income and a Flexi Access Drawdown is best suited to your needs because you can take the Tax Free Cash and income at any level to suit which may be more tax efficient for you.