Changing the income you take from your drawdown plan
If you’re considering changing the income you take from your drawdown plan, we’ll be happy to help. Please be sure you understand all your options and the effect of any changes you make. There are a few things you should think about before you make any decisions.
You should consider speaking with your financial adviser first. If you don’t have one or have any questions once you’ve read this summary, or need any help understanding your options, just call us on 0808 234 2372, or +44 178 644 8844 if you’re calling from abroad.
How your drawdown plan works
A drawdown plan is designed to give you flexible access to your pension pot and control over where your money is invested. You can choose when and how much money to take out, subject to any limit that might apply and therefore help to manage your income needs.
The value of your investment can go down as well as up and you may not get back the amount that you put in.
These will vary depending on your plan. We can explain these to you if you get touch. They could include:
- Starting or stopping income payments.
- Increasing or decreasing your income payments.
- Taking single withdrawals.
As an alternative you could also purchase an annuity which provides a guaranteed income for life. You should speak to your financial adviser about this.
Things to consider before making your decision
There are some important things to consider before changing your income:
- Changing your income might mean that the tax you have to pay may change.
- Any income you take will affect the value of your plan, which means that it may not last for life. Taking a higher income increases the risk of your fund running out.
- In some circumstances an increase to your income may trigger the money purchase annual allowance. This will impact the amount you can pay into pensions in the future.
- Choosing to increase your income could impact your entitlement to certain state benefits.
- Your personal allowance could be affected.
- If you increase your income and owe money, creditors may have a right to the income from your plan.
Tax rules are complex and require careful consideration and the impact will depend on your individual circumstances. Taxation, legislation and HM Revenue & Customs practice is liable to change without notice. You may want to seek advice.
Protecting yourself from investment scams
According to Action Fraud, the UK’s fraud and internet crime reporting centre, an estimated £1.2bn is lost to investment scams every year. So if you’re thinking of reinvesting your income, take a minute to find out more, and stay ahead of the scammers.
What to do now
Changing your income is a big decision. You should speak with a financial adviser first. If you don’t have one, you can get details of financial advisers from pru.co.uk and selecting ‘contact a financial adviser’. You may be charged for their services.
Give us a call on 0808 234 2372 or +44 178 644 8844 if you’re calling from abroad. We can’t give you advice or make your decision for you, but we’ll be happy to help you understand your plan and talk you through all your available options and their possible implications.
We’re here 8am – 6pm Monday to Friday and happy to help in any way we can. Please make sure you have your plan number to hand when you call.