Flexible income 'worth considering' for pension transfer
02-02-2012 11:00
People considering their pension transfer options may wish to consider the advantages flexible income drawdown would provide when they enter their retirement.
Those who are eligible for this form of funding can significantly reduce their inheritance tax liabilities as a result of the product.
This is according to Skandia, which specified this opportunity is open to those who have access to a secure pension of over £20,000 a year.
Flexible income can then be used to provide unlimited access to all the money purchase pension savings that remain.
Greater tax efficiency is offered when compared with capped income, as the maximum drawdown on the latter is limited by legislation, where this is not the case for the alternative option.
Under capped income, £53,004 has to be moved into drawdown, while only £17,648 is necessary for flexible.
Individuals who do not meet the £20,000 criteria are advised to top up their earnings with other savings schemes such as cash Isas in order to address their immediate financial needs.
Pension expert for Skandia Adrian Walker noted flexible is a very new option, having only been introduced in April 2011.
He added a relatively limited number of providers offer the product, which is well suited to wealthier people who wish to maximise their income.
"It is surprising the difference using flexible income over capped income can have from an estate planning perspective. In the example, a person's estate could be over £20,000 better off initially if they received their retirement income using flexible drawdown," the expert explained.
"Magnify this by the significant sums some people hold in their pension savings and you can start to see the dramatic difference," he concluded.
Director-general of Saga Dr Ros Altmann recently recommended anyone preparing for their retirement should consider how to use flexible options to reduce the risk of rendering funding inaccessible in traditional schemes.
Ashall Glover Financial Services, pension transfer specialists
Posted by Jonathan Breen
