New income drawdown rules
Taking income drawdown from your pension in 2015
2015 saw the introduction of George Osborne’s radical pension changes, which are designed to give savers greater freedom to access their pension from the age of 55. One of the new rules was the introduction of flexi-access drawdown – a new type of flexible drawdown where you can draw as much money from your pension as you like with no minimum income requirements, and can continue to make annual contributions of up to £10,000 into your SIPP or other pension during retirement.
What happened to flexible and capped drawdown?
Before April 2015 savers approaching retirement could choose from two types of pension drawdown which limited your withdrawals in line with Government rates, and flexible drawdown which allowed unlimited withdrawals but required a guaranteed income of at least £12,000 per year (from an annuity, final salary pension or other sources).
Everyone is eligible to take a flexible income from their pension with the new flexi-access drawdown.
Savers who were previously enrolled in capped drawdown will remain so unless they make withdrawals in excess of their limit, but all flexible drawdown pensions have automatically been converted to flexi-access drawdown. As capped drawdown is no longer open to new savers, anyone who is yet to retire will be eligible for flexi-access drawdown.
What are the other new pension rules?
Speak to a financial planner first
This new pension freedom has been celebrated by many savers, but remember that you could run out of money in later life if you make too many early withdrawals. Similarly, if your investments perform particularly badly you will have less money to enjoy for the rest of your retirement. If you’re unsure about drawdown, a financial planner can tell you how long your pension fund will last and how much income you could potentially take.
Book a free consultation with a financial planner
Download one of our free pension guides
The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come. Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Pension Wise. Find out more about Pension Wise.