Pros and Cons Of Pension Income Drawdown

QROPS is one of the brilliant organizations in United Kingdom which is famous for being an efficient advisor to the people who are planning to ask for their pension income drawdown which can be opted after the age of 77. People opt for this plan in order to make their future secure and safe for themselves and their wards. The advantageous sides of this plan are as mentioned below:

●      You can access towards tax-free instantly

●      You can keep a record of the details of your investment

●      You can also avail the relaxation to vary your income amount according to your necessity in daily life

●      It also helps in controlling the amount of income tax you are paying to the government

●      Choices to the pensioners will not be provided to buy an annuity

●      If the person who is running the account is dead, then his/her spouse or the wards can avail the facilities of the account

●      Funds can provide the benefit of growth of a tax-efficient environment.

Apart than these advantages, it has several disadvantages, they are mentioned below:

●      Future investment plans cannot be guaranteed at some point or the other

●      High amount of withdrawals from the account may not be continued

●      The degree of income may modify due to the 3 years of analysis  

●      The annual rates can be minimized in near future

●      Enhancement in the level of flexibility may bring enhancement in the administration cost

●      As the income withdrawal level is going to enhance, the less amount of money will be available for the dependants

QROPS is interested in helping more people for the pension accounts. Old people are pretty much dependent on the pension income drawdown which is absolutely essential for them, as they don’t have any other option for further work.

Choose Pension Drawdown and Get Multiple Benefits

Pension drawdown or income drawdown is a type of pension withdrawal in which you withdraw a part of your pension amount from your pension account, while the remaining amount remains invested so that it could increase with time. Income drawdown is a very good alternative of purchasing annuity. Following are some benefits that you will get by choosing the pension drawdown option:

• The nominee or dependent of the pensioner can get the complete residual fund in the pensioner’s account, which is not the case with most of the retirement schemes.
• The annuity purchase option remains open with pension drawdown. You may purchase annuity when you find the rates favorable.
• The transferring of your funds to income drawdown immediately makes you entitle to a 25% tax-exempted withdrawal from your pension account; later withdrawals can be made up to a maximum annual limit set by the Government Actuaries Department (GAD).
• This concept gives you extended control over your retirement income; you may determine when you would like to receive your retirement income and in what manner.
• You can get funds for an early retirement through income drawdown. This amount is exempted from tax and could be used to invest in any future project.
• This option also provides you with enough money to meet unanticipated expenses in future.

Pension drawdown facility is available till the age of 75 only; after this age the drawdown scheme is generally terminated and the outstanding funds are transferred to Alternative Secured Pension (ASP).

You may get more information about pension drawdown as well as other associated topics like QROPS, Alternative Secured Pension (ASP), Phased Retirement.

Significant Advantages of Pension Drawdown

Pension drawdown is also known by the name income drawdown. Actually, it’s a kind of pension withdrawal in which you take a part of your pension amount out of your pension account while the remaining amount remains in the account so that it could increase with time. Pension drawdown provides a very good alternative to purchasing an annuity. Income drawdown allows you to withdraw up to 25% of your total pension amount; this 25% withdrawal is a tax-exempted amount.

Pension or income drawdown is considered most suitable for individuals with larger funds or those having multiple sources of retirement income. It is so because there is an inherent element of risk in pension drawdown; therefore, it is also sometimes called unsecured pension. Despite the risk involved in it, a large number of people opt for it owing to the benefits that this investment option provides. The little risk involved in income drawdown is worth taking if one takes into consideration the benefits it offers. Following are some significant benefits of pension drawdown:

• Unlike the majority of retirement schemes, in case of pension drawdown the nominee or dependent receives the entire residual fund in the pensioner’s account.
• In pension drawdown annuity purchasing option remains open; so you may purchase it when the rates are favorable.
• When you transfer your funds to the income drawdown plan, you instantly become entitled to a 25% tax-free withdrawal from the pension account; later, you can take the income from the invested fund up to a maximum annual limit determined by the Government Actuaries Department (GAD).
• The concept of pension drawdown provides you more control over your retirement income; you can decide with it that when you would like to receive your retirement income, and in what manner.
• Your funds remain invested with pension drawdown, giving you the option to increase it further at the time when you don’t require income from an annuity.
• Income drawdown makes available for you the funds for an early retirement. This amount, which is tax-free, could be used to invest in any future project.
• This option also provides you with enough money to meet unexpected expenses in future.

It is important to be noted that pension drawdown facility is available until 75 years of age only; after this age, the drawdown scheme is normally terminated and the outstanding amount is transferred to Alternative Secured Pension (ASP).

To get more information about pension drawdown, along with other related topics like QROPS, Alternative Secured Pension (ASP), Phased Retirement, and more.

Capped Drawdown – Good Planning Can Improve Your Future Income

Many UK pensioners are wondering if capped drawdown is the right way to go to make their pension savings more attractive in the future. Well, there are pros and cons to every option but in the opinion of financial planning experts, the scheme does create potential benefits if used in the right way.

Capped drawdown was introduced by HM Treasury as a replacement for the unsecured pension scheme more commonly known as income drawdown and Qrops.  Under the capped income drawdown plan, investors are free to leave their retirement fund invested whilst drawing an income which is capped or limited to the maximum equivalent of a single life level annuity.

Capped pension schemes also introduce some changes to the death benefits of those who do not purchase an annuity. If an annuity is purchased by the pensioner, the accumulated pension fund is exchanged for the annuity.  If a spouse’s pension is not arranged at the time of the annuity purchase, then payments will cease on the death of the annuitant and the unused pension funds are lost.  Under a capped drawdown scheme, however, there are a number of options available to the surviving dependants: capped drawdown income can continue to the dependant, the remaining fund value can be paid out as a lump sum or an annuity can be purchased.

The basics of capped pension drawdown plan are relatively simple and easy to understand. Some areas of the rules can be confusing and you may need the advice of a financial expert to fully understand how it can affect your savings and income.

If you need cash from the pension, you can use it just like an annuity to get tax free pension. However, rather than taking a fixed income with the remaining funds as you do with an annuity, here you are free to withdraw income from the plan subject to the cap.

Capped drawdown is in fact a means of taking pension benefits without buying an annuity. One big advantage with this scheme is that there is no upper age limit. For those under 75 years, the upper income limit is reassessed every 12 months and the assessment is based on age and fund size.

Significant Merits of Income Drawdown

Income drawdown is also known with the name pension drawdown; it is basically a kind of pension withdrawal in which you take out a part of your pension amount, while the remaining amount remains in the account so that it could increase with time through interest. The pension drawdown option makes it possible for you to use partially or fully the savings in your pension fund once you decide to retire or semi-retire. Pension drawdown provides an alternative to purchasing an annuity. In it, your pension remains invested and you have to withdraw a portion of the pension pot each year as an income.

Following are some significant merits of income drawdown:

·         Income drawdown concept offers complete residual amount to the dependent or nominee; this option is unavailable in most of the retirement schemes.

·         The door to purchase annuity remains open; so you may proceed when the rates are favorable.

·         On transferring your fund to  pension drawdown plan, you become entitled to make an immediate withdrawal of 25% amount that is exempted from tax; later, you can take an income from the invested fund up to a maximum annual limit fixed by the Government Actuaries Department (GAD).

·         Income drawdown provides you with increased control over your retirement income; it allows you to determine when and how you would receive your retirement money.

·         Your fund remains invested with pension drawdown, when you don’t want to invest the money in taking an annuity.

To know more about Income Drawdown, along with other associated things like QROPS, Drawdown Rates, Alternative Secured Pension (ASP), Phased Retirement, etc., you may visit : Gerardassociates.co.uk