Flexible Drawdown
Flexible Drawdown
This new pension option was introduced in April 2011 and for those individuals over the age of 55 who can demonstrate they have guaranteed income of £20,000 per annum minimum (called the Minimum Income Requirement, or MIR), they will be able to drawdown an unlimited amount from their pension funds.
The amount drawn will be treated as income for tax purposes and having entered 'Flexible Drawdown' there will be no restrictions on the amount an individual can draw from a pension fund. The 'Capped Drawdown' rules cease to apply.
The types of income that will count towards the MIR includes basic state pension, additional state pension, level annuity income and scheme pensions. Purchased life annuities, other state benefits and drawdown income do not count towards the MIR.
In the same way as 'capped drawdown', this form of flexible retirement provision has an element of investment risk and may not suit everyone, especially those who prefer guarantees in their retirement strategy.
To be eligible for flexible drawdown an individual must have ceased to be an active member of any defined benefits scheme before an election can be made and this option may typicallysuit someone who wishes to take a higher level of income than may be available from 'capped drawdown'.