Access to specific investment funds depends on your chosen drawdown provider, but you can essentially have access to them all. Quantity isn't always going to be better than quality however. There is sometimes an overwhelming number to choose from which is why some providers suggest particular investment strategies you can adopt to make the process a little easier. If you are using income drawdown more for the facility of taking income flexibly, rather than wanting access to the widest variety of funds for growth, these may be for you.
You can take an income from your pension fund once you reach age 55. You can transfer one or all of your pensions into an income drawdown plan, however there is often a minimum fund value providers will accept.
The way you take income from drawdown is completely flexible. You can take income as and when you want, monthly, quarterly, half yearly, annually or just as and when you need it. Some providers charge an annual fee in the years you withdraw income. Remember, any income taken is added to you income tax bill for the year and therefore if you take a large amount out post April 2015, you may breach a higher tax threshold.
Unlike annuities, assets can be passed onto your estate on death. If you are married or have a partner and pre-decease them, they could benefit. Assets could be passed onto a financially dependent spouse or partner, without a deduction of tax if they purchase a pension income. For example if they carried on income drawdown in their own name or purchased an annuity, there would be no liability to death tax. If however they didn’t want to purchase a pension income through one of the available method, and instead put the money in a bank account, or if the assets were passed onto someone who is not financially dependent, the fund would be taxed at 55% up to April 2015. As part of the new pension reforms the death tax is going to be scrapped post April 2015. This means anyone inheriting the fund if you died before 75 would not pay any tax, whether that be spouse or children. This has allowed a fairer protection of pension assets for the estate of the holder. Equally should you die post age 75 there would be no 55% death tax to pay, the beneficiary (those who wish to take income from the fund) would be taxed at their marginal rate. Any income taken would just be added onto their taxable income for the year and an the appropriate rate applied.
Yes you can. You can transfer your money in drawdown to another provider or purchase an annuity at any point. Keep in mind though that if you take income out for a number of years, there is no guaranteed you’ll be able to purchase a higher annuity than one which could be purchased today.
Income drawdown allows you access to over 4,000 funds through some providers, so there should be a portfolio of funds to meet everyone’s attitude to investment risk. If you have no experience of investments or are confused about where to start, we strongly recommend you seek help through a qualified financial adviser. A financial adviser should assess the type of investor you are by discussing your investment experience, where you save your money, other assets you currently have invested and by conducting a investment risk profile of you. They should then be able to recommend a portfolio of investment which suit the type of investor you are. Never invest in funds that you don’t fully understand the risks of. Read our blog on what to consider when building your portfolio
Income drawdown offers you a lot more flexibility than an annuity. An annuity provides an income for life, however income drawdown may not. If you take a large income from your fund, it doesn't perform to replace the income you're taking and/or you live a long retirement, it can run out. This is an additional consideration when deciding if income drawdown is suitable for you. Consider what would happen if the income from your drawdown plan ran out. Do you have other sufficient income to live on either through other pensions or savings. Have a play with the drawdown income calculator to get an idea of how long your funds may last.
A Self-Invested Personal Pension (SIPP) is a personal pension that allows you to invest in pension assets and savings of your choice from an allowable range. SIPP's generally offer a wider range of invest able options which can include investment funds, shares, commercial property, bonds and cash. The SIPP is essentially the tax wrapper which sits around your investments allowing to grow free from capital gains and income tax. A 10% tax however is not reclaimable from UK dividends.
Yes you can. For many, an annuity offers security to cover essential outgoings and drawdown is used as a more flexible way to take income. If you put all your pension funds into drawdown and later wanted to buy an annuity, you could use some or all of your drawdown fund to do this.
I have a fund of £440k with standard life. After taking 25% in April & £16k p.a. Is there any advantage in using another provider?
Good Question. Many companies offer the facility of income drawdown and therefore it comes down to two main factors for me. 1. Ongoings costs. The main providers, Standard Life included are well know brands with a loyal pension accumulation client base. Their ongoing charges might not be the most cost efficient, but their reputation can sometimes mean people are willing to pay a little more for the service. There are certainly cheaper drawdown providers out there and Standard Life know it, but they don't have to compete on cost as their reputation is enough to hold onto many clients. 2. Confidence in Fund management. With over 4000 investment funds available there is a wide range of potential investments for a drawdown pension. It is therefore essential you have confidence in the fund management of your money. Standard Life have a top breed of fund managers controlling their funds. You need to ensure the funds you are invested in meet your attitude to investment risk. Are you happy with 'in house' Standard Life funds, or are you looking for something a little more bespoke. A financial adviser should be able to assess your needs and provide you with an appropriate portfolio of funds. Interestingly, Standard Life have just bought Pearson Jones IFA to assist them with the expected demand for at-retirement pension drawdown advice. Clearly they want to retain their client book with the increased availability of drawdown plans and competition amoungst providers. So in short the advantage to move away will only come down to cost and fund management.