Pension Drawdown - how it works
No up-front fees, independent, no obligation Pension Review and Recommendations by post, e mail and telephone.
Step 1Over the telephone tell us about your needs & circumstances
Step 2We review your existing plans and consider your options
Step 3If what you have is good we will tell you why.If not we tell you how things could be improved.
If you do not accept our advice and recommendations you have nothing to pay!!
View our 80-second video about taking money out of your pension
At Pensionlite for advising on Pension Drawdown we provide a genuinely free, independent and no obligation service completed by telephone with recommendations posted to you to consider in your own time in your own home before making any decisions.
If you do not accept our advice there is no charge
If you accept our advice you will do so with a clear understanding of our charges, potential benefits and how our advice addresses your personal needs and aspirations.
Because we have provided this service for over 10 years we know that both our initial and any on-going charges are less than traditional face to face advise whilst providing a more efficient and effective service.
A pension drawdown is where you take some or all of your tax free cash from your pension, usually 25% of the fund value, and leave the remainder invested.
From the invested fund you then drawdown income, which is classed as earned income so liable for income tax deduction. The income you draw can be as a regular income and or ad hoc sums and if you have not taken all of your tax free cash these payments can be a mix of tax free and taxable payments.
To manage a Drawdown plan effectively and make it last for the whole of your life you need to ensure;
- That the investments within your pension fund are actively managed in line with your attitude to investment risk.
- That the withdrawals you make are no greater in any period that the fund has grown by. If not you will quickly deplete your capital and as it becomes worth less the opportunity for ongoing income diminishes and eventually runs out.
So, if you feel a Drawdown Pension is for you, once we understand your needs, circumstances and aspirations we will review what facilities your existing plans contain and compare them with the performance, charges and benefits of what is available in the whole of the Drawdown market place.
We feel it is better to check what you have before considering alternatives and in doing so consider what you are expecting over the long term, what involvement you wish to have in managing your pension on a day to day basis and also what your attitude to investment risk is.
Once all of these things have been considered we will, in writing, advise you as to what we believe is the best solution for you and why.
Answers to some common questions:
Am I eligible?
If you are over 55 and you have a pension that you are not currently in receipt of, you are eligible to take a tax free cash lump sum from your fund as well as income and or additional lump sums although the payments are liable to income tax deduction. If your pension is with a current employer this is not a good idea as you would have to opt out of the scheme and thus lose future employer contributions.
How much can I receive from my pension?
Under the new Pension Freedom rules the amount you can take from your pension pot is only restricted by how much you have. A proportion of your fund, usually 25%, can be taken tax free but any other drawings are chargeable for income tax.
The freedom to access your pension pot is an exciting opportunity but you should remember that the primary purpose of your pension is to support you in later life. You should, before you decide what to do, think about your future finances as well as any short term needs. We can help you decide.
How can I secure my income long term?
To ensure your income lasts your lifetime there are a number of strategies to consider. However, the simple fact is that one has to learn to live within a budget because if the cash you spend exceeds the income and or growth you receive from your funds your income potential reduces and if left unchecked over time will simply disappear altogether.
You need to review the income/growth and your expenditure regularly and adjust accordingly.
The other main consideration is income tax and so where and how you invest your funds can be worth another 20% or 40% of income if received tax free and or by using your personal allowances fully and this is something we will discuss with you.
You can mix and match your investment options so for instance using some of your funds to purchase a short term or reviewable annuity may be worth considering and provide an element of security that direct investment may not.
Your personal attitude to investment risk is something to review regularly as it can be adjusted in line with your circumstances or market conditions very quickly.
Pensionlite provide a regular investment review service in 3 different ways so you can do this in a way that suits you and your lifestyle. We provide an on-line review facility via our clients secure web site, you can chose to review in a paper format or you can ask us to update things regularly and tell you when things have occurred by post or e mail.
Most Pensionlite clients also have access to an on-line 24/7 valuation service so you can be in touch and update from anywhere in the world as long as you have either an internet connection or a telephone.
What happens to my pension if I die?
If you die before age 75 your spouse (or any nominated beneficiaries) can received your fund value as a lump sum or income, tax free.
If you die after 75 the fund can still be passed on but withdrawals/lump sums will be subject to income tax.
If you purchase an annuity, the income will stop when you die unless you build in death benefits from the start, like a spouse’s pension or guaranteed minimum payment period.
How much will your advice cost?
Our initial service from enquiry through to you receiving your Independent and No Obligation Review and Recommendation report is completely free of charge.
If you choose not to follow our advice there is no charge – you only pay for advice you accept!
If you choose to follow our advice and recommendations then all charges will have been declared and clearly shown within your Independent and No Obligation Review and Recommendation report.
Our service is designed to ensure that you are made aware of what your options are, what the implications and risks are of following our advice or not and what costs may be involved, completely free of charge, BEFORE you make any decisions.
What are the drawbacks of pension release/drawdown?
If you take a sum of your pension before you plan to retire there will be a smaller pot of money to provide you with an income, of some form, when needed.
Accessing funds from your pension once you reach age 55 or above, but before retiring, is very attractive and for some irresistible. We are after all human beings and the temptation to spend is all around us.
As a word of warning please remember that other than your tax free cash entitlement and any other pension drawings are classed by HMRC are earned income so liable to income tax at your highest rate of tax in the tax year you take the withdrawal.
To put this another way, if you are looking to make a purchase using funds from your pension please take into account the tax you may pay. If you are liable for 20% tax deduction then in reality what you are purchasing is in real terms 20% more expensive than the asking price.
Taking cash from a pension is not right for everyone.
Yes of course there are emergencies in life that we have to deal with but think carefully before making any decisions and seek qualified advice from an independent financial adviser who is suitably qualified to give it.
Can I still contribute to a pension fund?
In simple terms the answer is yes but if you use the full Pension Freedom rules and are accessing money under Flexi Access rules the maximum you can contribute in a tax year will be restricted to £10,000
These rules can be difficult to understand so please seek qualified advice before assuming that this or any other restrictions will or will not apply to you.
Is taking a lump sum compulsory?
The simple answer is no but please seek qualified advice before making any decisions at this could work against you. It is possible under Pension Freedom rules to receive a regular income made up in part of tax free cash if you do not want to take a lump sum.