Please note that Flexible drawdown will no longer be an option after 5 April 2015; please see 'Flexi-access drawdown'.
Until 5 April 2015 we offer Flexible Drawdown on all of our SIPP and SSAS plans.
From 6 April 2015, all clients taking Flexible drawdown will automatically be moved to Flexi-access drawdown. There will no longer be a need for clients to secure a sufficient income and they can then take as much of their pension fund as they choose. Clients will also be able to make contributions to their pension up to £10,000 pa, where previously no further contributions were allowed.
The following rules apply until 5 April 2015:
Unlike Capped Drawdown – which aims to ensure retirement funds are not prematurely exhausted - Flexible Drawdown allows your client to draw upon their fund without restriction.
Flexible Drawdown is dependent upon your client securing sufficient income, known as the Minimum Income Requirement (MIR), which is subject to certain conditions.
The MIR must be a secure pension income for life and can include:
- Basic and Secondary State Pension
- Lifetime Annuity resulting from benefits from a Registered Pension Scheme
- RPI-linked annuities
- Scheme Pension from either a UK Registered Pension Scheme or non UK relevant scheme
- Overseas pension payment equivalent to a lifetime annuity or Scheme Pension
Alternative income such as interest, rents and dividends, or investment-linked annuities without a guarantee, are not classed as acceptable income.
From 27 March 2014 the MIR has been reduced from £20,000 per annum to £12,000 per annum.
If the MIR is met, your client may withdraw sums from their plan at levels and times to suit their circumstances. They will pay income tax at their marginal rate on the payments received.
Protected Rights funds are able to be used to satisfy the MIR for Flexible Drawdown, as from April 2012.
Please note: If your client has made any contributions within the tax year, they will not be able to take Flexible Drawdown until the following tax year.
For the treatment of funds on death, please see Death benefits.