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One of the most welcome changes in the new Pensions legislation was the introduction of Flexible Drawdown. Many clients tell me they ‘don’t like pensions’ as they don’t see why the State should be able to restrict the amount of their own money they can take out of their own pension pot. The announcement that provided they can prove they will not be a burden on the state, by having at least £20,000 a year guaranteed pension income, clients can withdraw up to 100% of their pension fund makes good sense.

Most retirees will have at least a Basic State Pension of around £5,000, and many will have more than this when you add in SERPS etc. So let us say that leaves a requirement of a guaranteed pension income of £15,000 a year. Does that mean clients who want Flexible Drawdown may have to sacrifice up to, say, £250,000 (depending on age, gender, and state of health) to buy an annuity?

The good news is that you do not have to buy an annuity in order to provide that guarantee. A Scheme Pension, in which you can still control the underlying investments, is recognised as guaranteed income for the purpose of this legislation. At last our clients can have real and total control of their pension investments.

A number of companies offer Scheme Pensions, including at least one household name insurance and pension company as well as some of the actuarial companies that provide pension services and this development may now increase competition in this area.

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