Income Drawdown

Unlike an annuity, with Income Drawdown your money remains invested and you simply take a pension income directly from it. This is the most flexible way to take your pension benefits, although it may not be suitable if you want the security of income that an annuity offers.

This option might suit you if you want:

• To carry on paying in to your pension – if you’re under 75, you can still add to your pension pot and get tax relief
• Growth potential - as your pension pot stays actively invested in a tax efficient environment, there is potential for future growth
• A flexible pension income - you can take payments to suit you if you have a pension pot that’s large enough to sustain your withdrawals from it
• More control – you can buy an annuity at any time
• Flexible options on death – unlike some annuities, this pension can give flexible benefit options after your death

How much income will you get?

Income drawdown allows you to take a flexible income directly from your invested pot, within limits set by HM Revenue & Customs (see Risks and limitations). Aside from these limits, the income you'll get depends on a number of factors. The most important ones are:

• The amount of money you have available in your pot to take an income from

• How often you draw an income and the amount you take from your pot. The more you take, the less you will have for future years

• How your investments perform. For example, a lower than expected performance can reduce the amount of income you can take in future.   

The Standard Life difference

You’re supported by Standard Life’s award-winning customer service. We’ll take you through the transition from having a pension fund to receiving an income - smoothly and easily.

Taking Income Drawdown from Standard Life with a pension plan from someone else

If you want to take Income Drawdown with Standard Life using the value of a pension plan you hold elsewhere, speak to your adviser or call us on 0845 272 8810 (call charges will vary).

Transferring a pension plan needs careful thought as it may not be suitable for everyone. You may be giving up valuable benefits you have with your existing plan. We recommend you take financial advice to make sure it’s the best option for you.

Laws and tax rules may change in the future. The information here is based on our understanding at April 2012. Your personal circumstances also have an impact on tax treatment.

• Investment risk – As your pension pot stays actively invested, there is a risk that your investments do not perform as required. Some riskier investments will usually be necessary to achieve the return needed for the pension income to match the income available if a conventional annuity had been bought immediately. You need to be comfortable with this level of risk.

• Mortality risk – As you get older, you need to consider the longer-term impact of making withdrawals from your pension pot. Because your pension pot gets smaller each time you draw an income, your return from investments needs to get greater to pay out the same level of income.

• Pension income can go down – Poor investment returns, particularly if coupled with high pension income payments, could result in a significant reduction in your pension pot’s value. This could mean that pension income is lower than if a conventional annuity had been bought. Also, future annuity rates are not guaranteed and could be worse if an annuity contract is finally bought than they were when income drawdown started.

• Charges – These are generally higher than annuities.

• On-going maintenance – Income Drawdown needs regular reviews.

• HMRC income limits - The maximum income you can take from your plan is set by the Government to ensure the level of income available to you is sustainable, based on your plan value, age and Government Actuary Department (GAD) tables, (which reflect g it yields and how much an equivalent annuity could purchase at that time).
  
  These limits have to be recalculated every three years beofre age 75: every year after age 75 and each time money is moved into your income pot. The GAD recalculation could result in  an increase ot decrease in your maximum income limit, meaning the income available to you could be significantly higher or lower than that previously available to you.

• Refer to the Key Features (PDF, 331kb) for full information

Get financial advice

Need help deciding? Speak to your financial adviser or contact us on 0845 272 8810 (call charges will vary).

Laws and tax rules may change in the future. The information here is based on our understanding at April 2012. Your personal circumstances also have an impact on tax treatment.

The real benefit of Income Drawdown is the flexibility it gives you. If you’re not sure how and when you want to take your money in retirement, this could really work for you.

With Income Drawdown you can:

• Continue to pay in - If you’re under age 75, you can still add to your pension pot, and get tax relief
• Take an immediate lump sum - You can take your tax-free lump sum, normally up to 25%, now but don’t take any income until later, maybe because you’re still working
• Take a flexible pension income - Take the income you want − between zero and the maximum limit. This can be regular or at intervals to suit your needs. Your maximum will be recalculated at least every three years or every year after age 75.
• Select flexible options on death – Unlike a standard annuity, Income Drawdown can give flexible benefit options after your death. Your dependants can continue to take a pension by income drawdown or use your pot to buy an annuity. Alternatively, the remaining pot can normally be paid as a lump sum (less 55% tax) on death.
• Take control – You can buy an annuity at any time, giving you control over the timing of any annuity purchase. Alternatively, you can choose to continue using income drawdown

Laws and tax rules may change in the future. The information here is based on our understanding at April 2012. Your personal circumstances also have an impact on tax treatment.

• You need a pension pot of at least £50,000
• You cannot normally access your money until age 55.
• You must be a UK resident

Income Drawdown can only be set up using a Standard Life Self Invested Personal Pension (SIPP). To find out how to set up a SIPP, call us on 0845 272 8810 (call charges will vary)

Income tax

The income you take from your pot will be taxed under the Pay As You Earn (PAYE) system. You can find out more on the HM Revenue & Customs website.

If you have elected Flexible Drawdown (an alternative form of Drawdown which allows unlimited withdrawals but requires you to meet criteria around minimum levels of guaranteed income), you can make further Pension investments but they would be subject to a tax charge.

If you are already taking Income Drawdown from a SIPP you won’t receive any further tax relief.

This link is provided for general information purposes only. Standard Life accepts no responsibility for information contained in the site or for the site not being available at all times.

HM Revenue & Customs limits on pension tax relief

Personal payments into pensions only attract tax relief if they are within 100% of relevant UK earnings for the tax year concerned (or £3,600 if greater). Tax charges may apply if you exceed the annual allowance. Further information regarding the Annual allowance is available in the Key Features (PDF, 331kb).

Laws and tax rules may change in the future. The information here is based on our understanding at April 2012. Your personal circumstances also have an impact on tax treatment.

The charges and costs for your Income Drawdown will depend on a number of factors. The good news is that you only pay for the services that you use on our SIPP. You can get more information on this in our Charges Guide, and your personal illustration.