Income drawdown is also called pension drawdown. It’s a kind of pension withdrawal in which you take out a portion of your pension amount and the remaining amount keep invested so that it could increase with time. Pension drawdown is a very good alternative to purchasing an annuity. With it you can withdraw an amount of up to 25% of your total pension amount; there is no tax imposed on this withdrawal.
Pension drawdown offers you a high degree of flexibility in the use of your pension amount. The remaining amount in your pension account could be transferred on to your children or dependents in case of your death.
Income drawdown is best suited for individuals who have larger funds or those having multiple retirement income sources. This is because there is a certain amount of risk involved in it; that is why it is sometimes called unsecured pension. Although there is an element of risk, but the reward of this risk taking is also great. The risk is that the income generated from this source tends to vary within fixed minimum and maximum limits. The minimum return could be naught while maximum could be as high as over hundred percent (this much high return is not possible with other schemes in the class). The income drawdown rates may at times differ between men and women.
Income drawdown facility is available until the age of 75 years. After 75 years the drawdown scheme is generally terminated and the remaining money is transferred to Alternative Secured Pension (ASP). The option of traditional annuity plan to receive regular income is open even after the termination of the pension drawdown facility.
