Unsecured Pensions (Income Drawdown)

How an Unsecured Pension Works

An Unsecured Pension (USP) allows you to draw a taxable income from your pension fund, whilst continuing to invest the residual fund. This can be continued to you reach 75, at which time an annuity has to be bought or the money transferred into an Alternatively Secured Pension (ASP).

How Much Income Will You Receive?

The income that can be taken from this type of arrangement can be varied each year between a minimum of £0 and a maximum of 120% of what a single life annuity (calculated by the Government Actuaries Department (GAD), would pay for someone of your age. The amount you receive is determined by HM Revenue & Customs (HMRC) and Department for Work and Pensions (DWP) rules and is reviewed every 5 years. The GAD tables used to calculate the figure are based on the amount your fund would buy as an annuity based on your life only and with no allowance for any future increase.

If you die before whilst taking an Unsecured Pension, the remaining fund can be:

• paid to your dependants less 35% tax
• used to provide an income via an annuity to your spouse

Alternatively, your spouse could continue taking a Unsecured Pension.

Why Take an Unsecured Pension?

With this type of scheme, you can choose to purchase your annuity at the time when annuity rates are most favourable. In addition, as annuity rates increase with age, then you may be able to secure a higher pension than could have been purchased at outset - especially if investment growth is achieved on the residual funds during that period.