If you want to take pension benefits without buying an annuity, then you may want to consider flexi-access drawdown. This is one of the new methods of taking pension benefits introduced in April 2015. In many ways it is like previous options of drawdown but with unlimited withdrawals.
By opting for flexi-access drawdown, you have the options to:
- Take tax-free cash (usually up to 25%) and no taxable withdrawals
- Strip out the fund, but manage income tax
- Use it like a bank account and make occasional withdrawals
- Aim to provide a long term income
- Leave the money invested to pass on, inheritance tax free
Advantages of flexi-access drawdown
Advantages of flexi-access drawdown
- The tax-free lump sum can be taken
- Withdrawal levels can be varied
- Flexi-access drawdown permits you to just take the lump sum only
- Flexi-access drawdown avoids buying an annuity
- You don’t have to decide on whether to include spouse’s benefits or other such options with a flexi-access drawdown contract
- The fund can remain invested – so it could grow further
- The fund can be invested in various ways, from low risk to high risk
- The fund can be passed on, in the event of death
Disadvantages of flexi-access drawdown
Disadvantages of flexi-access drawdown
- Annuity rates could go down, if you later decide you want to buy an annuity with your remaining funds
- The flexi-access drawdown contract could fall in value
- The ongoing income is not guaranteed and could go down
- Flexi-access drawdown requires ongoing monitoring of the plan
- Charges could be higher for drawdown than annuity purchase
- You could end up with no money left in this contract, if you withdraw too much and/or investment returns are poor
- If you take a taxable withdrawal, you will not be able to pay more than £4,000 per year into a defined contribution pension