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Quick comparison.

Without the need to buy an annuity at the age of 75, your clients now have more flexibility and choice when they retire. The following table compares Capped and Flexible Drawdown with an Investment-backed annuity.

As your clients get older, they could benefit from mortality cross-subsidy which they won’t be entitled to if they stay in drawdown. However, clients with at least £20,000 secured annual income can take as much income out of drawdown as they want.

Event Capped
Drawdown		 Flexible Drawdown Investment backed annuity
Minimum age 55 55 55
Maximum age None None 85 (switch to fixed income at age 90)
Enhanced income terms for clients in poor health No No Yes
Minimum income requirement (MIR) N/A Must have MIR of £20,000pa. N/A
Maximum withdrawal 100% of GAD rates No limit 120% of benchmark
Minimum withdrawal Nil income Nil income 50% of benchmark
Frequency of reviews Every 3 years to age
75, then yearly		 N/A Every 5 years
Available for Protected Rights Yes No Yes
Death benefits when in drawdown Provide pension to spouse/dependant's
Provide annuity to spouse/dependant's
Paid as a lump sum		 As for Capped Drawdown Option of:
Reversonary annuity to spouse/civil partner
Lump sum (value protection)
Guarantee period
Tax treatment of lump sum death benefits 55% or
If no dependant's paid to charity tax free		 As for Capped Drawdown 55%
Transfer to another Provider To another personal pension plan offering drawdown or
Purchase of lifetime annuity		 As for Capped Drawdown Yes if provider will accept funds but only as a lifetime annuity
Mortality cross subsidy* None None Lifetime bonus