New Flexible Drawdown Rules
Flexible Drawdown will allow some individuals the opportunity to withdraw as little or as much income from their pension fund, as they choose and as and when they need it. You have to declare that you are already receiving a secure pension income of at least £20,000.
Secured pension income means:
- A company pension being paid to you either from the UK or from Overseas; or
- An annuity being paid to you (from a personal pension or company pension) either from the UK or from Overseas; or
- A state pension being paid to you either from the UK or from Overseas.
A secured pension income does not include
- Payments from an income drawdown pension
- Payments from a short term annuity (i.e. one that has a specific end date)
- Income from protected rights pensions (i.e. the state second pension or SERPS). These are expected to be abolished from April 2012
A secured pension income is taken as the gross annual amount of pension (i.e. before any income tax is deducted). The requirement to have a secure pension income of £20,000 could change in future to increase the level of income required.
Income from flexible pensions is taxable in the same way as income from any other pension.
If you are already using income drawdown then you can elect to switch to flexible drawdown subject to this being an option available to you from your pension provider.
You must cease making contributions to pensions should you wish to take up flexible drawdown and must not be building up benefits in a defined benefit scheme (e.g. company pension scheme to which only your employer makes contributions)
You must sign a declaration confirming that you are eligible for flexible drawdown.