Following pension freedoms’ removal of a number of restrictions in the way retirement benefits can be taken, discover why Flexi-Access Drawdown has become the preferred option for many people
Flexi-Access Drawdown Opens Up A World Of Retirement Possibilities But It’s Not Without Risk
What Is Flexi-Access Drawdown?
Once you’re 55, Flexi-Access Drawdown gives you the option to take as much as you like from your pension fund at retirement. This doesn’t apply to final salary (defined benefits) schemes.
By definition, Flexi-Access Drawdown is one of the most flexible retirement options available. Instead of exchanging your pension for an annuity that would provide you with a secure income for life, Flexi-Access Drawdown allows you to take up to 25 per cent tax-free cash up front and draw a variable taxable income from the rest, which remains invested.
You don’t have to move your whole pension fund into Flexi-Access Drawdown in one go. You could move it gradually as your circumstances change. For each part of your fund you move, you can take up to a quarter of the amount as tax-free cash, with the balance going into Flexi-Access Drawdown.
Flexi-Access Drawdown offers the potential for growth through successful investment, which could provide you with the ability to protect your income from the ravaging effects of inflation. It also gives you the opportunity to pass on your pension fund when you die.
This control and flexibility is appealing, but it does make managing your retirement benefits more complicated. It’s also a much higher risk option than an annuity. If investments don’t go the way you want, or if your pension pot is depleted as a result of you taking excessive income withdrawals, your income could well be reduced. You could even run out of money if you draw out too much, or your investments fail. With Flexi-Access Drawdown, the risk and responsibility rests with you, but if you buy an annuity, the insurance company carries all the risk for you.
Flexi-Access Drawdown In Detail
Featured on FTAdviser is a comprehensive collection of articles covering all the aspects of Flexi-Access Drawdown, contributed to by a number of leading financial experts from some of the UKs largest pension providers and SIPP operators.
Pros And Cons Of Flexi-Access Drawdown
Pension freedoms acted as a catalyst for driving more people towards considering Flexi-Access Drawdown products, instead of slipping into a default annuity… continue reading about Flexi-Access Drawdown
Suitability Checklist For Flexi-Access Drawdown
For whom might Flexi-Access Drawdown be appropriate?… continue reading about Flexi-Access Drawdown
How Flexi-Access Drawdown Works
For many years, clients have been able to choose between capped drawdown and flexible drawdown… continue reading about Flexi-Access Drawdown
Pension Freedoms Impact On Flexi-Access Drawdown
Pension freedom and choice came in with a bang in April 2015 as providers, regulators and advisers braced for a sea-change in investor behaviour… continue reading about Flexi-Access Drawdown
Eight Tips For Picking A Flexi-Access Drawdown Product
Reported on Retirement Planner, here are Aegon’s top tips for people choosing Flexi-Access Drawdown.
The Ultimate Authority On Flexi-Access Drawdown
If you really want to learn about the technical details of Flexi-Access Drawdown, have a read of the HMRC Pensions Tax Manual on Flexi-Access Drawdown.
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AJ Bell Is Often The Best Value SIPP For Stockmarket Assets
Over time, charges can wipe out a huge part of your fund. We like AJ Bell because there are no set-up costs. If you hold passive funds, which is our preference, or shares, investment trusts, EFTs, gilts or bonds, you pay one small fixed fee no matter how large your fund. And when you come to draw your benefits either as occasional drawdown or UFPLS payments, there's a small charge for the whole year no matter how many times you access your money (many SIPP and SSAS providers charge more than this for each payment). However, you should always compare charges in detail, because AJ Bell could be more expensive than other providers, depending on the type of stockmarket assets you hold.
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