Available Options
Various Available Options in Income Drawdown Plans
Income Drawdown is a special financial plan that gives the plan holder an income on invested pension funds. The income is not fixed and varies according to market returns for that particular period of time. The risk factor associated with money invested in such a plan makes it a difficult option for some people. However, the higher returns each month might seem like an attractive proposition to others.
As a first step, each individual has their personal problems and situations to consider after they have retired from regular service. Thereby, the selection of a suitable Income Drawdown Plan is not easy for the average Joe. It is therefore, advisable to consult a financial expert before making a final decision and signing a contract with a company.
Income Drawdown can provide you with a completely tax-free income after regular intervals of time. While your original capital lies with the company as an investment, you can choose to withdraw profits on a regular basis or choose to withdraw after a fixed period of time. There is a certain fixed amount that can be paid to you during the initial 5 year period of the Income Drawdown Plan. This depends on the total investment amount and the official calculations by the GAD or Government Actuary’s Department. There are no restrictions on the minimum withdrawal from your profits. There are certain options available to you in terms of fund withdrawal in Income Drawdown Plans. You can opt to get a lump sum after a fixed period of time but in this case the profits are taxable. The second option is to get regular payments as offered by the particular plan. The third option allows you to use your income from this plan to invest in a separate annuity fund. All these options are subject to conditions and rules by the specific company in question.
Every 5 years, the Income Drawdown plan has to be revised appropriately, according to the amount left in the fund and the particular circumstance of the individual involved. At the age of 75, you have the option of switching to an annuity plan. That allows you to get a fixed income from your investment, while your primary investment is completely safe. If you are not interested in investing into an annuity plan, your company will offer you suitable options based on your requirements.
Income Drawdown Plans are suitable for people who are willing to take the risk of investing their pension fund, in the hope that they will get increasing returns and a growth in their initial investment amount. The risk of such an investment is advisable for those who have other means of income besides their pension funds.
For a lot of people, their sole income source after retirement is their pension fund. In such cases, investing in Income Drawdown Plans might not be the appropriate step to take. Like any market investment, your initial capital might end up diminished and with changing annuity rates you might not get the interest you were hoping for.
About the Author
Retirement income has to last the rest of your life, so it is important to ensure you make the right choices. There are many articles on the subject of annuities v income drawdown and you can read all of these on the internet. Using an adviser will help you understand the merits of each and how they can impact on our retirement plans.
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