Phased Drawdown

This type of plan was primarily introduced for those individuals wishing to ‘phase’ the taking of their retirement benefits, instead of buying a lifetime annuity and being tied in to annuity rates.

How phased drawdown works

One way to operate phased drawdown is to use a combination of income drawdown and tax-free cash to provide an income. At the plan’s commencement your fund is invested in a portfolio of investments in a similar way to drawdown.

Part of your pension fund is encashed to provide you with an income, which in the first year is made up of a tax-free cash sum or a combination of tax free cash and drawdown income. As and when further income is required, additional funds can be encashed to provide this.

Phased retirement

There is an alternative to using income drawdown, you could purchase a series of annuities. This type of plan is known as phased retirement. Each time you buy an annuity, you can purchase an annuity of any design.

Retirement income

When you require your retirement income, you select the amount you wish to draw and then the pension fund pays this out to you in the form of tax free cash and income. You can make further income withdrawals from your fund when you require additional retirement income. Maximum levels of income are subject to overall limits set by HM Revenue & Customs.

This approach will provide you with an income in a tax efficient manner and can also provide higher levels of benefits in the event of your death than either an annuity or full drawdown. Please note that this type of arrangement is complex to set up and specialist advice should be taken.

To obtain your free, no obligation annuity quotes you can enquire online, or call us free on 0800 0124 374. One quick free phone call from you can make all the difference. We’re here Monday to Friday, 9 am to 6 pm.