Benefits can be taken in stages, as required, leaving the remainder of the fund invested. The options for taking your benefits are:
1. Income drawdown
Income drawdown is when you defer buying an annuity (pension) and draw an income, within the limits set by the Government Actuary's Department, directly from the fund in the meantime. Up to 25% of the fund can be taken as a tax-free lump sum before your 75th birthday. You can continue to take income drawdown after age 75. This is known as Alternatively Secured Pension (ASP).
If you take a high level of income early in the term of the plan, this can reduce the income available for you and your dependants at a later date.
There are some risks associated with drawdown such as investment growth, mortality cross-subsidies and levels of withdrawal. For more information click
here.
With Standard Life's SIPP you can take income drawdown in 3 ways:
Full drawdown
Full drawdown is when you take all of your tax-free lump sum and an income from your plan.
Phased drawdown
With phased drawdown you can take some of your tax-free lump sum, your income or can buy an annuity from different parts of your plan at different times.
You can use phased drawdown to:
- ease back gradually on work by starting to replace earned income with pension income.
- provide more flexible death benefits, because parts of your plan that you haven't used to buy pensions can be used to provide an income, a pension or a lump sum for your dependants.
Dripfeed Drawdown*
With Dripfeed Drawdown you can take a specific amount of regular income, each instalment of which includes a portion of taxable income and a portion of tax-free lump sum. We will apply a pension date to part of your plan at every payment date to provide the tax-free element. This will normally continue at each payment date until you buy an annuity or ask us to pay your income in another way, or until you have applied a pension date to all your accounts.
You can use Dripfeed Drawdown to:
- maximise the death benefits payable to your dependants
- reduce the tax you pay on your income from the plan.
If you select Dripfeed Drawdown, it is possible that the tax-free lump sum element of your pension fund can be completely eroded by this method.
* Available if your are invested solely in pension funds from Standard Life. Dripfeed Drawdown is not available for income drawdown on or after age 75.
2. Annuity
You can buy an
annuity from Standard Life or from another authorised pension provider. An annuity will pay guaranteed regular income for the rest of your life.
Please note, annuity rates (which determine the level of annuity income you will be able to buy) can change significantly, both up and down, over time. This means that if you decide to defer buying an annuity, and make income withdrawals instead, the annuity rates at the time you actually buy your annuity may be lower than if you had bought an annuity immediately, resulting in a lower annuity income.
Note:
Tax and legislation are liable to change. The information given here is based on Standard Life's understanding of law and HM Revenue & Customs practice at the date of publication.
Page 6 of 6
