Flexible Drawdown

Flexible drawdown is an entirely new form of drawdown which enables some investors to take as much income as they like from their pension, provided they meet certain criteria. Unlike income drawdown there are no income limits at all and you can draw as much income as you like when you like. However flexible drawdown will not be available to everyone and there is certain criteria that must be met before you can choose it.

Flexible Drawdown Criteria

The following criteria has been set out by the government to ensure investors can enter flexible drawdown with sufficient secure income in place to help prevent money running out later in retirement.

• You must already have a secure pension income of at least £20,000 a year in place. This can include your state pension, an annuity or a company pension. Investment income doesn’t count. Pension pots not needed to provide the £20,000 could be taken as flexible drawdown. Remember - pensions can be split, with part used to buy an annuity to secure the necessary income and the remainder taken as flexible drawdown. You must receive at least £20,000 of pension income in the tax year you enter flexible drawdown.

• It isn't possible to take flexible drawdown from a protected rights pension (money from contracting out of the State Second Pension or SERPs). Protected rights are expected to be abolished in April 2012 which will effectively remove this restriction.

• Flexible drawdown can only be taken once you have finished saving into pensions. If pension contributions have been made to any pension in the same tax year or if you are still an active member of a final salary scheme, it isn't possible to start flexible drawdown. Once in flexible drawdown it isn't possible to make further pension contributions.