• The value of the investment can go down as well as up and you may not get back as much as you put in.

60%+ of people who come to me with enquires about pensions are between 50 and 60 years of age.

They are often still working and plan to keep on working until they reach the age of 65 for one reason or another. Because they still have an income they often aren’t keen to crystallise their personal pensions completely as it will be taxed at their tax highest tax band as earned income, nor are people inclined to buy an annuity as rates are poor.

There are options available to people in this situation. It may be that you can take income drawdown (flexible or capped -> phased or un-phased) from your UK registered personal pension or SIPP, although you typically must have a pot of £50k or more to do this.

In essence basic income drawdown enables you to ‘draw’ a slice of your pension each pension year. If you think of your pension as a pie, you can take one slice per year whilst keeping the rest still invested in the markets. You will need to opt for a 25% tax free lump sum (PCLS) at the onset of drawdown in non-phased drawdown should you wish to. Income is taxed through PAYE.

Phased income drawdown is where the ‘slices’ are treated as actual segments of the pension in their own right or lots of mini pensions within one big one. If you opt for ‘phased’ drawdown you can take a PCLS each time you crystallise a ‘slice’.

Annual income is based on 0-120% of GAD (Government Actuarial department) rates, and reviewed every 3 years pre-75 yoa and annually thereafter.

A summary of the pros and cons to a drawdown pension arrangement are as follows:

A drawdown pension can be taken from age 55 and is typically used supplement your income, provide increased flexibility and possible enhanced death benefits for beneficiaries.

In general, Stakeholder pensions don’t offer drawdown and defined contribution pensions vary from scheme to scheme.

Alex Cheema is a highly qualified Pensions and Investment Specialist with more than a decade of experience in financial services and planning.

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Alex Cheema, BSc (Hons), MSc 2 , DipPFS, Certs CII (MP & ER) is a Financial Advisor, Pension & Investment Specialist with more than a decade of financial experience. Ready to improve your finances? Book a 1 hour, no-obligation consultation with Alex.

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Alex Cheema is a trading style of Old Bray Financial Ltd which is an appointed representative of Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited, which is authorised and regulated by the Financial Conduct Authority. Intrinsic Financial Planning Limited and Intrinsic Mortgage Planning Limited are entered on the FCA register (http://www.fca.org.uk/register/) under reference 440703 and 440718.

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The value of pensions and investments and the income they produce can fall as well as rise. Tax treatment varies according to individual circumstances and is subject to change. Estate planning, wills and LPAs are not regulated by the FCA.