unsecured pension

Unsecured Pension, which in the past has been known as 'Income Drawdown' or 'Pension Fund Withdrawal' is an important retirement option worth considering, particularly for those individuals who have pension capital of at least £100,000 left after the payment of the tax free cash lump sum.

The option was introduced following changes to Pension law in 1995 and removed the previous requirement to purchase an annuity at retirement.

'Unsecured Pension' allows an income to be taken directly from the pension fund itself.

Unsecured Pension enhances your retirement options by enabling you to put off that annuity purchase until a time when it may be more suitable. Most of the major insurance companies now offer 'Unsecured Pension' plans.

These plans still allow up to 25% of the retirement fund to be taken as Tax Free Cash.

Your income levels are determined by reference to annuity tables produced by the Governments' Actuarial Department (GAD limits). The maximum income draw allowable is 120% of the highest level of income determined by the annuity tables. The minimum income which can be taken is nil. These limits allow further flexibility and so perhaps enable full retirement from your working life to be gradually phased in. Whilst these plans are categorised as 'unsecured' pension plans, eventually an annuity will need to be purchased, usually by the age of 75, although there is now a further option for individuals reaching the age of 77 years to consider - the purchase of an 'Alternatively secured pension' plan.

Unsecured Pension schemes are relatively complex and are not suitable for everyone, but they can offer for some individuals a far more flexible approach to retirement income. Careful consideration must be given to your individual circumstances, including the value of your existing pension(s).

We strongly recommend advice from us be sought if you are considering this option.