THE VALUE OF PENSIONS AND INVESTMENTS AND THE INCOME THEY PRODUCE CAN FALL AS WELL AS RISE. YOU MAY GET BACK LESS THAN YOU INVESTED.
TAX TREATMENT VARIES ACCORDING TO INDIVIDUAL CIRCUMSTANCES AND IS SUBJECT TO CHANGE.
The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested. Tax treatment varies according to individual circumstances and is subject to change.
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 has been 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.
TAKING WITHDRAWALS MAY ERODE THE CAPITAL VALUE OF THE FUND, ESPECIALLY IF INVESTMENT RETURNS ARE POOR AND A HIGH LEVEL OF INCOME IS BEING TAKEN. THIS COULD RESULT IN A LOWER INCOME WHEN THE ANNUITY IS EVENTUALLY PURCHASED.