Aside from typical Flexi-Access Drawdown which was covered in more depth in our last blog post, there are a number of other options that may be available from your pension plans. The specific features available to you will be dictated by the type of plan your pension funds are currently held within therefore a full pensions review with one of our experienced Independent Financial Advisers is necessary in order to advise you on what options are available to you and which would be the most suitable for your own personal goals and objectives.

Some of the options available to you may be:

Capped Drawdown

These are older arrangements that are no longer available for new policies, however if you already have a capped drawdown plan you are able to continue with it. Withdrawals from capped drawdown plans were “capped” at a level equivalent to 150% of a comparable annuity. This figure is set by the Government Actuary’s Department. Provided your income level remains below the “cap” your Money Purchase Annual Allowance will not be triggered by the withdrawals however should you make withdrawals in excess of this cap, the plan will automatically convert to a Flexi-Access Drawdown where there are no restrictions on withdrawals and your Money Purchase Annual Allowance will be triggered.

Uncrystallised Funds Pension Lump Sum (UFPLS)

Although not technically classified as a drawdown, UFPLS involves withdrawals whereby 25% of the payment is tax free and the remaining 75% is taxed at you marginal rate of income tax. These withdrawals can be made in smaller transactions or the entire fund value can be taken at once. This can provide a tax efficient way to take income as only 75% of the income will be subject to income tax. This method of withdrawal can be useful for those wanted to utilise their personal allowance (the amount that can be earned each year without any tax liability) as they are able to make higher withdrawals when utilising the 25% tax free element without incurring further tax liabilities. Your adviser will be able to do these calculations for you and explain the most tax efficient route to achieving your income goals.

Small Pots

For pension pots valued at £10,000 or less, the entire pot can withdrawn without impacting the Money Purchase Annual Allowance (MPAA). 25% of the fund value will be paid tax free, with remainder being taxed at your marginal rate of income tax.

Income from other investments

Many of us also have additional savings such as ISAs, Investment Bonds etc therefore your pensions review will also take into account any additional savings you have amassed as there may be other tax efficient income streams available to you. (For example, income from ISAs is entirely tax free therefore ISA income may be preferable over taxable pension income).

If you wish to discuss your plans for retirement please feel free to get in touch. Our local, friendly team of Independent Financial Advisers will be happy to provide advice and suitable recommendations tailored specifically for you.

Give us a call on 01788 571122 and we will be more than happy to help.

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. It does not constitute advice. All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor. 

PJL Financial Services Limited are authorised and regulated by the Financial Conduct Authority. 

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