Beginners' Guides
An alternative to buying an annuity, income drawdown, as the name perhaps suggests, lets you ‘draw down’ (or take income) from your pension pot on a regular basis.
Your pension pot will remain invested. Each year, you can choose to take a taxable income from your pension pot, subject to limits imposed by the Government.
When can I buy an annuity with my pension pot in my Income Drawdown plan?
You can use all or part of your pension pot at any time to buy an annuity. All of your pension pot must have been used to buy one or more annuities, before your 75th birthday.
You must choose to take any tax-free cash lump sum at outset, when you first ‘move into’ drawdown.
On your death, the remaining pension pot can be used to provide a taxable income for your dependants. Or, if you die before you reach 75, the pot can be paid to your beneficiaries as a lump sum, less a 35% tax charge.
Before you Do I have other income, for example from savings, to supplement my pension income?
Am I willing to take the risk that my overall income could be less through income drawdown than by taking it in one go through an annuity and cash lump sum?
Do I want to manage my pension fund and the income I receive?
Do I want to be able to leave a lump sum death benefit to my family if I die before age 75?
Is my pension pot big enough to allow me to take income drawdown? The minimum fund size is typically £100,000 after you’ve taken any tax-free lump sum.
You should always take financial advice before making any decisions about how to take your retirement income.
As part of the Lloyds TSB Group, Scottish Widows is proud to be an Official Provider of the London 2012 Olympic and Paralympic Games.
Print these Questions