When it’s time to draw from their pension, we make sure your clients are in full control. We’ll also help them do it as tax-efficiently as possible.
Since April 2015, members are able to access their pension with a lot more choice; but don't let your clients get stung by pension scams. Read our blog on the ways scammers are targeting clients and their pension savings.
Your clients can start taking benefits at any time after the age of 55, irrespective of whether or not they remain in employment. However, tax considerations may apply if benefits are deferred beyond the age of 75.
When drawing benefits they can receive a tax-free lump sum of up to 25% of the fund (limited to 25% of the Lifetime Allowance). This is known as a ‘pension commencement lump sum’ and can be taken any time after age 55 tax free.
The balance of the fund is then used to support their pension income, which can be paid directly from their self invested pension plan. As a result, they do not need to purchase an annuity from an insurance company upon retirement.
Drawdown allows your clients to retain control of their pension fund assets while receiving an income from them.
From 6 April 2015, all new drawdown plans are through Flexi-access drawdown which enables clients to take advantage of the greater freedoms available with no limit on the income levels that can be taken. Clients already in Capped Drawdown at this date can continue as they are or can request to convert to Flexi-access drawdown.
It will also be possible for clients to draw lump sums from their fund as often as they require without the need to go into drawdown through Uncrystallised Funds Pension Lump Sum.
A benefit of the self invested pension plan is that it is split into a number of segments - each of which is effectively an individual plan. By drawing benefits from these segments at different dates, retirement income can be tailored to meet an individual's requirements, mitigating income tax liability.
For example, a senior employee may "retire" by gradually reducing their working hours. In this wind down period as earnings reduce, segments can be vested each year to provide an element of tax free cash which - combined with income - could replace the missing salary.
Unvested segments remain fully invested while those drawn upon can remain invested under the Capped Drawdown or Flexi-access Drawdown options.
Please note: Dentons does not offer Scheme Pension.