More Income and tax free cash. When it comes to taking an income from your pension, different pension income options suit different people; this is why at Pension Annuity Expert we will try to find the right income options to suit your circumstances and more importantly your requirements. For some, being young enough to enjoy retirement is a priority, taking the most income in early retirement while they're fit and healthy enough to enjoy the benefits of being retired.
Traditionally, pension income will slowly increase over time, giving you more income the older you get. Unfortunately, for some, this means they get the most income when they can enjoy it the least! For those people who require the most income at retirement a potential option is income drawdown. Income drawdown allows you to take the tax free cash amount from your pension fund of 25%, while the rest of your pension fund remains invested. There's a huge choice of investment funds available giving your pension the best chance on continued growth.
Case Study Bob Johnson 53 is a divorcee with no dependent children and has worked most of his life in the coal mines of South Yorkshire. After many years of hard work Bob has decided to retire and enjoy life to the full. Following previous adventure holidays around the world Bob would like to enjoy retirement through travelling in Thailand and visiting his friends Australia!
Bob had an occupational final salary pension with the Mine Workers Pension Scheme and his main requirement was for the most possible income in the early years of retirement. With the help of Pension Annuity Expert he looked into the benefits of income drawdown for his pension income.
When comparing his options we found the following.
In this instance Bob Johnson has an attitude to investment risk (ATR) which is described as Moderately Cautious. This ATR is in line with the types of underlying assets needed to produce returns sufficient to keep pace with the erosion of pension capital (through taking income).
In this example Bob has chosen to take the maximum income allowed under current regulations. This being 120% GAD (Government Actuarial dept Rates)
Warning for people with lower ATR’s than stated there could be a danger that the underlying assets may not provide returns sufficient to replenish capital where maximum income is taken.
* Source AXA Elevate March 2010.