Retirement is changing

By Nigel Callaghan | 20 Jun, 2008 

Government research released recently shows that the proportion of pensioner’s still working has doubled in the last 10 years.

An increasing number of investors are no longer retiring on a magical date, such as their 60th or 65th birthdays. Retirement is becoming a gradual process as more people work part-time and use other investments in addition to pension savings to meet their retirement needs.

Income drawdown plans can lend themselves to this more gradual process. Since 2006, it has been possible for investors to take their tax-free cash allowance and to defer drawing any income from the rest of their pension savings for a number of years.

The tax-free lump sum can be used to reduce future expenditure, such as paying off the balance of a mortgage, or as an income top-up for a number of years. This can then makes working only a couple of days per week financially viable for many.

The balance of the investor’s pension savings remains fully invested so will continue to fluctuate in value and can fall as well as rise. An income can be taken from this fund at any point, ranging from nothing to approximately 120% of what an annuity would pay. This income stream can be stopped and started as often as the investor wishes. This allows investors further scope to maintain control of their income, which can be useful for tax planning purposes.

Drawdown is a complex area and if you are at all uncertain as to its suitability, we strongly suggest that you take advice. There are no guarantees and if pension savings are decreased by withdrawals or poor performance, your income will be reduced and in extreme circumstances could actually run out.

Please call us on 0117 980 9926 for further details.