Quick Enquiry
You must pay at least one payment into this type of plan which can be from a transfer of funds from UK Registered pension schemes such as personal pension plans and company schemes, protected rights and also including existing personal pension withdrawal schemes. All payments and transfers in must satisfy the company’s minimum criteria.
You must decide how your pension fund is invested.
By the age of 75 you must purchase a lifetime annuity or any time up until then or where permitted by legislation transfer to an alternative product.
Your funds are invested in different types of stocks and as such these can decrease or increase in value and are not guaranteed.
Future income could be lower for the following reasons.
- Investment performance is lower than illustrated
- Tax rules change
- Charges are higher than shown in your illustration
The maximum withdrawal is set every 5 years. If you transfer from another pension withdrawal scheme you may be required to keep the same review dates for that scheme. The limit will go down depending upon fund value and interest rates at the time of the review.
If you take the maximum income from day one this could affect fund performance and the fund may not be able to maintain that level of income withdrawal in the future.
The Lifetime Annuity that you would eventually purchase will depend upon the following.
- The remaining value of your fund, which could have been reduced by the income withdrawals.
- Your marital status at the time.
- Health
- The type of annuity that you wish to purchase
- The annuity rates available at the time, which will depend upon your age, interest rates available at the time. These could be higher or lower than if you had bought an annuity before.
By transferring into this scheme you will give up all rights under you previous scheme. For example if you are transferring from a previous employer’s final salary or occupational scheme your benefits could have been linked to the salary when you left that scheme, the number of years of service with that employer, some allowance for inflation, if the scheme was a public sector scheme the benefits could be quite valuable such as index linking plus spouses benefits and if transferred then the benefits would no longer be guaranteed.
If the application involves more than one transfer the tax free cash element is based on the funds received. In some cases the Tax free cash is certified which could restrict the amount of tax free cash to that amount from that portion of the transfer. Tax Free Cash from personal pension plans is usually 25% of the fund. You can also transfer in Protected Rights from the contracting out of SERPS and S2P. Some companies will allow for this to be included in the total fund value for Tax Free Cash purposes and others will not. Where there are multiple transfers into one scheme benefits are not paid until all transfers in have been received.
If the total value of your pension savings goes beyond the lifetime allowance of £1,650,000.00 for 2008-2009 you may be subject to an additional tax charge.
Pension Drawdown Unsecured Pension will enable you to transfer funds from UK registered pension plans that you have including old company schemes plus current income withdrawal plans which will then enable you to pool your funds and receive an income as specified plus take the Tax Free Cash. If the transfer or part of it is from an existing USP and the Tax Free Cash has already been taken then you can’t have it a second time.
You can decide on the funds that you invest in plus these can be altered at any time by switching funds. You can take an income from the fund up to the maximum amount allowable set by the Government Actuarial Department calculation. The income amount can be varied at any time. You do not have to commit to a lifetime annuity until age 75.
If you take the Tax Free Cash at the outset you can’t change your mind at a later date.
Your income withdrawals from the plan will depend upon investment growth, scheme charges, any previous withdrawals, changing interest and annuity rates. The maximum income is set by a formula set down in legislation and is calculated at the start of every 5 years or sooner if triggered by additional designation, partial surrender to purchase an annuity or divorce pension sharing order.
Tax is always an issue. The fund stays in the pension environment and is therefore free of Tax. The income from the fund is subject to tax as earned income. Cash sums paid on death are subject to a 35% tax charge.
If you have an unsecured pension plan and die before age 75 and have not purchased a lifetime annuity then the plan will cease and the value of the plan on the date of notification of death will be used to provide the beneficiaries with a cash sum, or a dependant’s lifetime annuity, or dependant’s income withdrawals form the plan.
