What is Guaranteed Drawdown?
In later life, when looking at retirement income you may value both certainty and flexibility. But until recently, if you were approaching retirement, you had to choose a retirement
income product that offered either one or the other. We understand that life is complicated, and what you need today may not be the same as what you need tomorrow. So this offers you the best of both worlds.
Guaranteed drawdown has the innovative feature that takes the security of an annuity and combines it with the flexibility offered by drawdown. This gives you both the certainty of a guaranteed income for life, and
the flexibility to adapt your arrangements to suit your financial circumstances. Your money will remain invested and has the potential to grow, and you can still leave it to the people you care about when you pass away.
1. A guaranteed income for life
If you want the confidence that the lifestyle you enjoy is protected, a guaranteed income for life offers the peace of mind that the money you rely on will never run out.
How much do you need to guarantee?
You can choose to guarantee all or part of your pension pot. For example, you may calculate that to
cover your essential living expenses, you need a minimum income of £5,000 a year
for the rest of your life. However, looking at your pension fund, you realise it could
provide an annual income of as much as £10,000. You decide to put half of your pot
in a guarantee, securing an income that covers your living costs. The other half you
could choose to invest in higher-risk funds, with a greater chance for growth but with
greater risk and no guarantee.
Funding a longer life
As the quality of medical treatment continues to improve, we are enjoying
longer, healthier lives. But as life expectancy increases, we need to plan for the extra
years we spend in retirement. Recent figures prove that having the security
and peace of mind of an income you can’t outlive, has never been more important.
2. The flexibility to get an income that suits you
Guaranteed Drawdown gives you the flexibility to choose when and how you take your income.
You have the flexibility to stop and restart payments in the future. For example, if you
decide to re-enter employment, you can choose to stop your payments, restarting
them at a later date.
Choose the payment schedule that suits your lifestyle needs, including monthly, quarterly,
half-yearly or yearly payments for example. Plus, if you need a top-up
to your income, you can always access further funds as a one-off.
When you set up your guarantee, you can choose to take a level of guaranteed income.
However, you have the flexibility to take less or more of this guaranteed income
depending on your needs, now and in the future.
If you take less, this helps to preserve your fund and gives you an increased opportunity
to grow the size of your fund. If you take more, this will reduce your future
guaranteed income proportionately.
Remember, you have the flexibility to change your income at any time. This means you can
increase or decrease the amount you take and the frequency with which you take it.
You can take advantage of the increased pension flexibility with the option to take
as much of your pension pot as you like as a taxed lump sum but this will
reduce your future guaranteed benefit proportionately.
3. The peace of mind of a guaranteed death benefit
Your pension not only supports you, it can be tailored to protect the well-being of those
you care about. With a guaranteed death benefit or by adding joint life, you can ensure
that your partner enjoys a comfortable lifestyle, even when you aren’t there to share it.
A guaranteed death benefit
One of the advantages of using the Guaranteed Drawdown feature is that it
gives you an automatic death benefit. This means that your partner and beneficiaries
can still rely on the safety net your guarantee provides and won’t suffer if the value of your
investment suddenly drops.
By choosing joint life, your income will cover you for your lifetime and your partner after
you pass away.
Your guaranteed income is taxed in the same way as income from annuity or an Income Drawdown.
Guaranteed Income Drawdown may be suitable for you if you have more than £25,000 in your pension fund and you are looking to retain control of your pension fund with the security of a guaranteed income for life. Contact us on 0800 03 04 008, or email us here.
The value of investments and income from them may go down. You may not get back the original amount invested.
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.
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.