Flexi Access Drawdown Features and How They Work
- Available to anyone over 55
- Immediate access to Tax Free Cash
- Unrestricted access to your fund
- Able to pass the full fund to your spouse and children tax free
- You have total control of your money
Flexi Access Drawdown is a retirement option that allows you to have control of your money both for now and when passing it to your spouse and beneficiaries in the future.
Like a Personal Pension, your pension remains invested in a pension plan with a pension provider. It then permits access to the fund to access tax free cash and income. In the past, many people have taken their 25% tax free cash entitlement in one lump sum.
We have seen an increase in people drawing their tax free cash. You can draw multiple tax free lump sums from your pension up to a maximum of 25% of the total fund value.
Once tax free cash has been taken, the pension then permits you unrestricted access to your money to draw funds at your choice. You may elect to set up a regular monthly payment out of your pension to replace your salary or supplement other income. This monthly payment would be taxed under your income tax rate. It you are a non-taxpayer and earn under the personal allowance of £11,000, there is no tax to pay. Once you go over £11,000 you are taxed at 20%, and over £43,000 you are taxed at 40%. There is currently an additional tax rate of 45% for those that have total income over £150,000.
We encourage anyone to take advice when drawing money from a pension as the level of tax you pay can erode the value of your pension plan very quickly. Careful consideration needs to be given when drawing money out of your pension that will attract tax.
Your pension plan remains invested with a hope that the investment return generated will offset the payments (lump sums, ad hoc or regular income payments) being taken from your pension. This was always the traditional way of using drawdown.
The new flexibilities introduced in 2016 means you have total control and full access to manage and use the funds as you choose.