Income Drawdown

Drawdown Income (formerly known as Income Drawdown) is the option to draw tax free cash and a regular income (within permitted levels) directly from an individual pension without the need to purchase an annuity.

There are two forms of Drawdown:

Capped Drawdown

Where you can take withdrawals each year, of between zero and 100% of the upper limit calculated by the Government Actuaries Department (GAD). In plain English this level is roughly what a level, standard annuity would pay to someone of your age.

Flexible Drawdown

If you have a guaranteed income of at least £20,000 per annum from sources such as State Pensions and Final Salary company pensions, there is no upper limit to what you may withdraw and therefore you could, in theory take the whole fund as one withdrawal, subject to tax, on the amount in excess of the 25% lump sum.

Drawdown Income is generally invested in a diversified portfolio of funds and therefore can go up or down in value, however it is also possible to invest your pension directly into high interest deposits which eliminate the risk to capital associated with the Stockmarket.

Advantages of Income drawdown

  • Your fund (less tax) is available as a lump sum to your spouse/dependents should you die before age 75.
  • Alternatively your spouse can continue to draw income or exercise an Open Market Option from the whole fund.
  • There can be significant benefits on the death of the policy holder, for their partner or estate.
  • Income Flexibility.
  • You can exercise an Open Market Option at a later date.

Level Annuity Rates

Single Life Minimum Standard Rate Typical Enhanced Single Life Minimum Standard Rate Typical Enhanced
Male 55 5545.08 6782.00 Female 55 5371.56 6636.24
Male 60 6078.84 7250.00 Female 60 5840.16 7199.98
Male 65 6739.92 8346.00 Female 65 6417.48 7939.56
Male 70 7742.88 9152.00 Female 70 7275.60 8869.56
Male 74 9320.28 11083.00 Female 74 8553.24 10806.00

Level annuity rates +10-year guarantee

Single Life Minimum Standard Rate Typical Enhanced Single Life Minimum Standard Rate Typical Enhanced
Male 55 5496.48 6668.00 Female 55 5342.40 6378.00
Male 60 5996.28 7059.00 Female 60 5794.20 6784.44
Male 65 6571.20 7926.00 Female 65 6315.96 7514.00
Male 70 7360.80 8484.00 Female 70 7035.00 8347.00
Male 74 8435.76 9604.32 Female 74 7990.80 9510.00

3% escalation annuity rates

Single Life Minimum Standard Rate Typical Enhanced Single Life Minimum Standard Rate Typical Enhanced
Male 55 3706.08 4876.00 Female 55 3468.72 4567.00
Male 60 4147.80 5353.00 Female 60 3870.00 5002.68
Male 65 4901.88 6516.00 Female 65 4504.68 5196.00
Male 70 5932.08 7403.00 Female 70 5395.32 7128.00
Male 74 7402.80 9223.00 Female 74 6658.32 8986.00

The above table is based on a £100k pension fund with a limited number of annuity features and should be used as a guide only.

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