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.