As an alternative to purchasing an annuity at retirement it is now
possible to take an income directly from a pension fund.
This has the particular advantage that the pension funds remains
invested. This gives flexibility to take different levels of income
as a client's circumstances change.
Income drawdown is particularly important to those who do not wish
to buy an annuity for example, clients:
in poor health
with spouses in poor health
with a substantially younger spouse
who wish to optimise their Inheritance Tax planning
who have other temporary income such as consultancy earnings
Tax free cash
Proposed legislation due to come into force in April 2006 will
enable the maximum tax free cash to be taken from a pension scheme
without commitment to take any significant income. This is of major
benefit to those who want to access up to 25% of their pension fund
for a capital project whilst still working. This issue is complex
and needs individual consultation.