Flexi-access drawdown

Apr 14, 2015   Posted by Lynn Eccleston

The frenetic activity of tax year end has now subsided and thoughts now turn to 2015/16. Radical changes affecting savings and financial advice may lead to conventional wisdom being turned on its head. You now have more control, choice and responsibility over your retirement savings than ever before. You will need help to understand what this means at every step of your retirement journey, from saving towards retirement, taking an income and preserving what’s left for your families.

What is flexi-access Drawdown?

Flexi-access drawdown is a new type of income drawdown from 6 April 2015 which allows individuals of pension age to draw any amount from their money purchase pension fund, whenever they want to. This option therefore enables ‘unlimited’ amounts to be withdrawn at any time. The first 25% of the fund that is being crystallised can normally be paid as a tax free cash sum, but the whole amount of any withdrawals taken by the individual over and above the initial tax free cash sum will be subject to income tax at the member’s highest marginal rate in the tax year they are paid.

Existing pre 6 April 2015 flexible drawdown arrangements automatically converted to flexi-access drawdown on 6 April 2015 but unlike the under the ‘old’ flexible drawdown rules, there is no longer any requirement for someone accessing flexi-access drawdown for the first time after 5 April 2015 to have a minimum level of secure income.

As well as being an option for a member’s own pension funds, flexi-access drawdown can also be used, after the member has died, to pay a drawdown pension to a beneficiary of the member even if the beneficiary is under the normal minimum pension age (currently age 55).

Reduced Annual Allowance for taking flexible income

The price for accessing the new flexibility is that the annual allowance is cut to £10,000 for money purchase schemes. But the full £40k allowance can be maintained if just tax free cash is taken or for anyone already in capped drawdown prior to 6 April 2015 who remains within the income limits.

Please contact the team on 01772 750055 if you wish to discuss your circumstances