Unsecured Pension
Download our free
Income Withdrawal Mini Guide here
Income Withdrawal ("Unsecured
Income")
The
Income Withdrawal, or Drawdown (now known as "Unsecured Income")
rules were amended and relaxed somewhat since April 5, 2006, and the new
rules also apply to pre April 2006 plans:
The
maximum annual limit for income withdrawals is 120% of an equivalent
annuity return (as set out in revised Government Actuarial Department
"GAD" tables). Formerly this was 100%. The minimum annual
withdrawal is now 0% (i.e. no income needs to be drawn). Reviews will be
every 5 years, rather then every 3, and as before the unsecured pension
must stop by age 75.
Action
Point: All
persons who have an existing plan should review and obtain
independent advice in the revisions.
Action
Point:
Persons with large existing Income Drawdown plans must take care not
to break the Lifetime Allowance. Pensions in payment are valued at 25:1;
e.g. based upon an income level of £64,000 this equates to £1.6
million: any other unvested funds could potentially be taxable at
55% unless otherwise protected! If this could be you - contact
us to clarify your position and if necessary protect it well before
April 2009.
Alternatively
Secured Pension ("ASP")
Download our free
Alternatively Secured Pension Mini Guide here
The
compulsion to take out an annuity at age 75 with all an individual's
remaining pension funds was relaxed from April 2006 so that a
person may take out an Alternately Secured Pension (ASP) plan. Moreover,
this may be placed under a Family Trust so that upon death, family members
can receive the assets into their own pensions.
This is an alternative to an annuity,
and is a form of pension fund withdrawal under which:
-
There is no minimum income that must
be taken, but the maximum is reduced to 70% of the GAD rate.
-
Annual reviews are required to set
the income limit, although the equivalent annuity rate is always based
on the age of 75.
-
After death, the fund must be used
to provide an income for any dependents, or (in the absence of any
dependents) a lump sum may be passed on for the benefit of another
member of the scheme (e.g. a friend or relative ) or a charity ( in
both cases nominated by the plan-holder).
This will suit those who wish to
keep their funds invested, take a lower income than an annuity will
provide, and wish to be able to pass on pension assets after death.
Potentially, the assets within the Family Pension Trust could be passed
from generation to generation.
Action
Point : (Post A-Day) This is a major change from the current regime.
If this sounds of interest to you then you should
contact
us for further information on this important area of pensions
planning.
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