Perk up your income
The amount of income that can be withdrawn each year from one of these schemes is limited to Inland Revenue limits of between 35 and 100 per cent of the income that broadly would have been provided on the same sum by a standard, single person's level annuity. This rule is designed to prevent you from depleting your funds by withdrawing too much.

Taking control
Another attraction of pension fund withdrawal is that it allows the individual to take control of their pension fund and pass this to their dependants or estate if they die before an annuity has been purchased. Even though the fund is taxed at 35 per cent, it can normally be passed free of inheritance tax to a wide range of potential beneficiaries using the scheme's discretionary death disposal rule. This could be an attractive option for someone if they have a younger spouse or substantial fund.
Other options (if death occurs before purchasing an annuity) are for a spouse to leave funds in the pension fund withdrawal scheme as long as an annuity is purchased before age 75 (or before when the deceased spouse would have attained age 75, whichever is earlier). At this point the surviving spouse must buy an annuity, using the remainder of the fund. There is no 35% tax charge on the fund if this option is selected.

Cash is king
The aims of pension fund withdrawal are to generate sufficient investment returns to cover the cost of the chosen plan, provide a regular income and then replenish the fund's value so that it is maintained, so that in the future an annuity purchase can be made by the time the individual reaches the age of 75. Before making any decisions in this area, you should always seek professional independent advice. Please e-mail or contact us.