Impact of Flexible Drawdown

Posted: 14/03/2011 15:37:40 by Global Administrator | with 0 comments

Of the many changes to pension legislation introduced by the coalition Government, perhaps the one receiving most publicity amongst individual advisers and the high net worth community is the introduction of Capped and Flexible Drawdown.
 
Despite phased vesting, unsecured and alternatively secured pension already offering flexibility and control of retirement assets, the age old problem of limited access and penal tax charges on death remained a significant downside of the current regime.
 
The revisions to drawdown, with revised GAD tables and the withdrawal of the 120% uplift on income calculations, will result in material reductions to those currently enjoying maximum withdrawal. In my mind this is pushing those individuals towards Flexible Drawdown and we have already seen significant interest in this, as one of the few providers having the capability to offer it from 6 April 2011.
 
Within our 30 years pension expertise, it has always been implied that tax reliefs were only provided such that resulting income would be for life. Similarly the FSA’s regulatory guidelines on drawdown suggest they should be set at sustainable levels. However in allowing liquidation of the fund as long as the Minimum Income Requirement is met, Flexible Drawdown ‘spits in the eye’ of previously held mantra.