Income drawdown plans were introduced in 1995. The changes removed the requirement to purchase an annuity at retirement. Income drawdown allows an income to be taken directly from the pension fund itself.
Unlike Phased Retirement the income is taken direct from the fund. The maximum level of income is set by the Government Actuary's Department (GAD) based on the size of the fund, age, sex and current gilt yields. The GAD rate is broadly equivalent to the equivalent single life annuity that you could have purchased. The maximum income can be no more 150% of the GAD rate. The rate is reviewed every 3 years.
Since April 2015 there is now much greater freedom to choose how you use your pension fund and the rules regarding income drawdown are now largely irrelevant as there is so much flexibility in how you withdraw money from your pension. See New Rules About Pensions.
Financial Advice... pure and simple
The Independent Advice Bureau Ltd provides financial advice and planning, in plain English, to people who want to ensure they make the right financial decisions at the right times and at the right cost. It's simple!
Find Out More