The pros and cons of pension drawdown for expat retirees

Published:  18 Sep at 6 PM
Want to get involved? Become a Featured Expat and take our interview.
Become a Local Expert and contribute articles.
Get in touch today!
The latest buzzword in financial advice for expat retirees is pension drawdown, but how many of those considering it are fully informed as to whether it’s the right move given their circumstances?

Given the dearth of qualified, ethical FAs in most popular retirement destination and the difficulty of discovery one who is more than just a commission-hungry salesman, how do retirees make sense of Qrops and suchlike? Even if a particular product is authorised, there are guidelines relating to individual circumstances to be followed.

Flexible drawdowns are good for financial freedom by ensuring an uncapped income with no annual limits, but can soon empty the pension pot if care isn’t taken. And, although it sounds ideal for many, not everyone will qualify.

The main rule states that a retirement saver intending to take out flexible drawdown must have an annual income of no less than £20,000, not taking into account his or her private pension cash. Once in, there are both positive and negative features to the plan.

Positives include the flexible withdrawals, but after the initial 25 per cent tax-free withdrawal, all further payments are taxed. Remaining funds are still invested, or the entire fund can be left intact and used for tax-effective succession plans.

Negatives are that uncontrolled flexible drawdown may empty the pot years before death, that the balance in the fund offers no guaranteed return and, should the investor die before 75 having not drawn down the 25 per cent tax-free lump sum, a 55 per cent tax bill. Alternatives include capped drawdown or insurance-backed annuities guaranteeing an amount monthly for life.
Like this news?

Comments » No published comments just yet for this article...

Feel free to have your say on this item. Go on... be the first!

Tell us Your Thoughts On This Piece:

Your Name *
Email * (not published, needs verification one time only)
Website
Type:
  • Facebook
  • Follow us on Twitter
  • RSS feed
  • Facebook

Latest Headlines

News Links

News Archive