From 6^th April 2011, the rules governing drawdown from personally held pensions have been relaxed. In essence, if you can demonstrate ‘secure’ income of £20,000 per annum you will no longer be subject to the stringent rules on drawing funds from your personal pension savings once you have reached the age of 55.

If you satisfy this £20,000 minimum pension income criteria you will be able to choose the level of withdrawals from your crysallised personal pension arrangements.  This will enable you  to meet your own income requirements from your pension fund and not have income levels dictated the Government Actuaries Department. This is known as ‘flexible drawdown’.

Flexible drawdown might enable recipients to avoid paying a 55% tax charge on death as all the funds could be withdrawn from the pension. However they would (if not spent) form part of the deceased estate for inheritance tax purposes.

Another advantage of flexible drawdown is tax efficiency.  Recipients can limit their income each year to ensure that only income tax at the basic rate was being paid.  This income could be used to fund tax free investments, gifted as part of an inheritance tax planning strategy or simply spent.

However, you should be aware that benefits paid under a flexible drawdown arrangement are still subject to income tax at the prevailing HMRC rate.  In addition funds paid under flexible drawdown will form part of your estate for inheritance tax purposes – unless they’ve been spent.

If you think you might be eligible to benefit from flexible drawdown why not get in touch to see how we can help you to make the most of your pension savings.