Skip to main content

You are here: Home / Pensions / Income Withdrawal

 

Income Withdrawal

Pension benefit options

Within our Select SIPP and Full SIPP there are two pension benefit options:

  • Annuity
  • Income withdrawal

Benefits can be taken from age 55. In addition, with both options, there is an opportunity to withdraw a tax-free lump sum of up to 25% of the value of the pension fund being used for benefits.

Annuity purchase

Annuities provide an income for life and are available from insurance companies. With both our SIPP products you can choose the annuity that offers best value for you and meets your needs.

We strongly recommend that you obtain professional advice before selecting an annuity. Alliance Trust Savings does not provide annuities.

Income withdrawal

Income withdrawal allows you to withdraw an income directly from your pension fund. We offer this option in both our SIPP products.

There are two income withdrawal options

(a) Capped Drawdown

With a Capped Drawdown pension you can withdraw an income directly from your fund up to an amount that is broadly equal to the amount of the income available from a single life level annuity. The maximum amount of income that you can withdraw each year is recalculated every five years (annually after age 75).

(b) Flexible Drawdown

If you have at least £20,000 of secure pension income from other sources you can request to withdraw an income directly from your pension fund under the flexible drawdown rules. With flexible drawdown, there is no limit on the amount of the income that you can withdraw each year.

Back to Top

Risks of income withdrawal

Whilst income withdrawal is a flexible way of taking an income, which enables you to phase your retirement, if you wish, it is not without its risks.

You should remember that:

  • Your pension will remain invested, so will continue to be affected by investment performance. The value can therefore fall as well as rise, and can impact how much income you could receive
  • Taking income can reduce the value of your plan, especially if investment returns are poor and you’re taking a high level of income. In an extreme case this could actually lead to the value of your plan being reduced to zero.

If you are unsure if income withdrawal is suitable for you, you should obtain professional advice.

Risk warning

Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested. Tax rules may change in the future and taxation will depend on your personal circumstances. All investments carry an element of risk, which may differ significantly. If you are unsure as to the suitability of any particular investments, you should seek professional financial advice.

Death benefits

If you die prior to age 75 without taking pension benefits, your fund can normally be paid out to beneficiaries tax-free.

If you die after purchasing an annuity the death benefits available will depend on the terms of the annuity that has been purchased.

In all other cases, if a lump sum is paid out to a beneficiary, this will be subject to a 55% tax charge. This does not apply where a lump sum is paid to a charity – there is no tax charge.

More information

More information is available in our Taking Pension Benefits Guides which are available on the right hand side or via the Literature Centre.

If you are looking to take pension benefits, including flexible drawdown, you should complete a Taking Pension Benefits form and return it to:

Alliance Trust Savings Limited
PO Box 164
8 West Marketgait
Dundee
DD1 9YP

Back to Top