From this amount you can take 25% tax-free (£3,000) with the remaining money invested in your drawdown account to provide the remaining income shortfall. Let’s say your Independent Financial Advisor (IFA) – by using their phased income drawdown calculator – has recommended you drawdown £12,000 from your fund. If your salary has reduced by £500 per month (£6,000 per annum), you may wish to make up the difference with an equivalent amount from your pension fund. To illustrate how this works, we can use the salary example above. Make an enquiry today and we can arrange for one of the pensions specialists we work with to get in touch and discuss further with you.Īn example of how phased income drawdown works The advisors we work with will be able to help you identify pension providers who will offer phased income drawdown plans. Retirement planning can be quite complex, which is why it’s very important you seek independent advice from an experienced advisor before making any major decisions. Why you should speak to an expert if you’re considering phased income drawdown Phased income drawdown is a very tax-efficient way of allowing you to retire gradually by reducing your working hours and using your pension fund to top up your income until you decide to retire completely. The obvious drawback to this is the amount of tax-free cash you can take when you convert the entire fund upon full retirement will not be as high. Whenever you take out a segment from your fund as part of a phased income drawdown, you can first take part of that portions tax-free element (25% of that segment).īy converting segments of your pension fund on a regular basis, rather than all at once, you are able to stagger the tax-free cash element you receive. If you need to increase the income from your pension fund, as you cut back on more working commitments, you can increase the amount you withdraw from the pension fund, which will mean a larger slice of tax-free cash can be included. Here’s how it worksīy combining your pension drawdown with your phased retirement, you can start to take an income from part of your pension fund which would include the tax-free cash element only for that segment you draw down, leaving the rest of the fund intact. If you decide to cut down the number of working hours you’re prepared to do, this will obviously result in a reduced income.įor example, your reduced working hours mean your monthly earnings have decreased from £2,500 to £2,000 – how are you going to fill this void? This is where a phased pension drawdown plan can help. It’s not unusual these days for many people to phase their retirement rather than let it all happen once they reach a certain age. Since April 2015, the use of income drawdown has become much more attractive due to a number of changes instigated by the UK government, making these types of policies much more flexible in terms of accessing your pension fund and a healthy alternative to the more traditional method of purchasing an annuity. Phased income drawdown is available to anyone aged 55 or over who has, through their working life, paid money into any form of defined contribution pension scheme (also referred to as a money purchase scheme). What is phased income drawdown and how does it work? Retirement Interest-Only (RIO) Mortgages.Interest-Only Mortgages vs Capital Repayment Mortgages.First-Time Buyer Interest-Only Mortgages.Mortgage declined after valuation survey.Mortgage Declined After an Agreement in Principle.Releasing Equity to Buy Another Property.Transferring a Mortgage to Another Property.Mortgage With Bonus and Commission Income.Joint Borrower Sole Proprietor Mortgages (JBSP).Self-Employed Mortgage with 1 or 2 years accounts.Late Payments and Mortgage Applications.Bad Credit Mortgage in Northern Ireland.Taxation depends on individual circumstances. Before investing in funds please check the specific risk factors on the key features document or refer to our risk warning notice as some funds can be high risk or complex they may also have risks relating to the geographical area, industry sector and/or underlying assets in which they invest. Past performance or any yields quoted should not be considered reliable indicators of future returns. ![]() ![]() The value of your investment can go down as well as up, and you can get back less than you originally invested.
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