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Drawdown after 6 April 2015

The new simpler flexi-access income drawdown allows people to manage their income throughout retirement, giving control and flexibility.

People can take as little or as much income as they like and flexi-access drawdown gives people the ability to manage their income tax position.

With flexi-access drawdown funds continue to be invested – so there is the potential for investment growth. Unused funds at date of death can be passed on to loved ones with flexi-drawdown.

If death is before the age of 75, dependants pay no tax on the lump sum or income, allowing funds to be passed down the generation tax-free up to the lifetime allowance. Over age 75 the fund is passed on free but income will be taxed at marginal rates.

Ultimately flexi-access income drawdown allows flexibility, so by using this option you leave the door open to purchase an annuity with unused funds at a later date.

Cash can therefore be ring-fenced to use to pay for things such as long term care costs. On the downside, there is a risk that people can run out of funds if they drawdown too much.

Ultimately this option may not be suitable for everyone, as some savers may not have the risk appetite or their pension pot may be too small.

As income drawdown is classed as a flexible product, once an individual has taken more than the tax-free cash sum of 25 per cent, future tax-relievable contributions are limited to the new money purchase annual allowance of £10,000 a year, instead of £40,000.

Please contact us to discuss your income drawdown needs.

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