A Pension Drawdown (or Income Drawdown, Income Withdrawal, Pension Release as they are sometimes called) is a personal pension plan from which you can draw an income. Previously known as an Unsecured Pension (USP), from April 2011 is it now known as Capped Drawdown and Flexible Drawdown.
A Pension Drawdown plan allows you to unlock the tax-free cash from your pension plans without taking out an annuity. You retain ownership of the funds and the funds continue to be invested. The options (Capped Drawdown and Flexible Drawdown) are alternatives to a pension annuity, which gives greater flexibility.
Main features of a Pension Drawdown plan
- You can take a 25% tax-free lump sum from age 55
- You can take an income between 0 and 150% of the rate set by the Government Actuaries Department (GAD).
- The income you withdraw can be varied at any time up to the maximum amount to suit your needs or control your tax liabilities
- The maximum income is reviewed and recalculated every three years currently
- You can transfer any number of pension plans (personal and occupational) to one single income drawdown plan
- You retain ownership of your pension fund and control of your investment
- Choice of death benefits for dependents
- Your Spouse can receive 100% of your fund on your death - paid as income. If lump sum benefits are taken, there is a 55% tax charge and if over age 75 there will also be a lifetime allowance check.
THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.