Capital & Income Solutions

Although Annuity Plans offer guaranteed regular income, this is usually paid on a level basis (i.e. it will not increase with inflation purchase an Index Linked Annuity). If you choose an Index Linked Annuity it will be many years before the income levels will reach the amount you would receive from a level annuity.

By choosing and Income Drawdown Plan with guarantees you will guarantee a minimum income for the rest of your life, but will still have the opportunity for this income to rise depending on how the underlying investment assets perform. Unlike a standard drawdown plan, if the value of the underlying assets fall your income is still guaranteed at the highest previous level.

Unlike an Annuity a Guaranteed Drawdown Plan offers greater death benefit flexibility. You can choose to add your spouse at the time you take out the guarantee thus ensuring that he/she continues to receive guaranteed income for the rest of their life. Unlike an annuity however on the death of the second life the remaining value of the fund can be inherited by your family less a single tax charge of 35%.

To summarise, Guaranteed Drawdown provides:

• the certainty of a guaranteed income for life
• the potential to ‘lock-in’ increases to their guaranteed income if investment returns are good
• the knowledge that any increases in their fund will not be capped and if their fund value falls, their guaranteed income level will not
• the safety net of knowing that the guaranteed income level will never fall (though there are that could mean their income could fall)
• the potential to leave an inheritance from your pension fund to your dependants
• a choice of investment funds to suit most risk profiles
• the ability to carry on their guaranteed income after age 75 through an Income for Life Annuity or Income for Life ASP

Your income is guaranteed with guaranteed drawdown but the fund value is not. There are also certain events which could cause your guaranteed income to fall:

• the client takes out extra income above the guaranteed level
• a pension sharing order is made against the plan and part of the fund under the plan is to be paid to a former spouse
• the client buys an annuity (conventional or Income for Life annuity) at or before age 75 or moves to Income for Life ASP at age 75, and in any of these circumstances their fund is more than the available lifetime allowance
• some of the 1,000 policies that exist under the plan are cashed in to buy a conventional annuity or transfer to another plan

This is a complex area but as Independent Financial Advisers we can recommend any one of the Guaranteed Drawdown providers in the market place. For further information and advice please call either Gary Naylor or Philip Pryke on 0845 65039376 or complete the enquiry form below to receive a pack.