Flexi - Access Drawdown
What is Flexi-Access Drawdown (FAD)?
A Flexi-Access Drawdown (FAD) pension is a method of withdrawing benefits from your pension fund without purchasing a lifetime annuity.
Holders of money purchase pension plans can defer taking their pension in the form of an annuity and instead make withdrawals directly from the pension fund. This will first require the funds to be moved into a Flexi-Access Drawdown plan or converted to Flexi-Access Drawdown. [Any flexible drawdown plans that were in place before 6 April 2015 automatically became Flexi-Access Drawdown plans on 6 April 2015. Capped Drawdown Plans in existence before 6 April 2015 can be converted to Flexi-Access Drawdown].
The main purposes of drawdown pensions can be summarised as follows:
- Deferral of annuity purchase, thus avoiding being locked into low annuity rates which may apply at the time of retirement.
- The drawdown pension option enables the policy holder to buy an annuity at a time that is best suited to them and hopefully when annuity rates are more favourable or provides an opportunity to avoid purchasing an annuity altogether where appropriate.
- The option enables investors to retain control over their pension investments and allows them to continue to be invested in the markets.
- It postpones the decision of deciding which type of annuity to lock into, for example providing a contingent pension for a wife or husband and selecting a level or increasing pension.
- With flexi-access drawdown the amount of income that can be taken from the fund is not subject to any specific limits and therefore this method offers great flexibility. This can be useful for tax planning or where other sources of income are available.
Find out more in our Flexi-Access Drawdown Guide
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