Annuity Purchase, where the client wants no individual responsibility for investment risk going forward. They are happy to give their pension fund to an insurance company in exchange for a set level of income. This income may remain level or increase annually. It can be income for the planholder only or include a spouse’s benefit should the planholder die first. Once an annuity is purchased the terms cannot be altered so it is imperative to make the right choices at the outset.
In the event of death, if no additional benefits have been selected, the planholders income ceases and is lost to the insurer.
James Phillips & Co’s task is to find the best rates available from the annuity market. These may be the standard rates generally available or enhanced rates that can be obtained by having the client medically underwritten or if the client is a cigarette smoker.
Income Drawdown, where the client accepts individual responsibility for investment risk going forward. They are happy to withdraw their pension income entitlement from an invested pension fund account. This income is reviewed 3-yearly and so has the opportunity to increase should underlying investments maintain their value or prosper. There is no need to provide a spouses pension either as the spouse may replace the pensioner should he/she die. Income withdrawals may be altered at any time (to between 0%-100% of the plan value). An annuity may be bought at any time from the income drawdown fund.
In the event of death, the spouse or another nominated beneficiary may continue to drawdown in the place of the planholder. Alternatively, the plan may be wound up. Tax does not apply if the original pensioner died before their 75th birthday. If after 75 then the beneficiary is taxed at their personal marginal rate.
James Phillips & Co’s task is to put together a plan that is invested in line with the clients stated acceptable level of risk. Investments may be accessed from across the market, not tied to just one provider. Advice will then be provided as to the need for any tax free capital withdrawals required before income withdrawals commence.
The plans are reviewed formally with the client twice yearly to ensure that both income and underlying asset values remain within acceptable parameters.
Phased Retirement. The ability to take withdrawals as part income and part tax free cash. This has the advantage of only converting part of your fund to ‘income drawdown’ and thereby allows a regular income of which only 75% is subject to income tax.
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