Dealing with Pension Income Payments in Times of Uncertainty

Being able to drawdown income from your money purchase pension fund was a great addition to the original option of buying an annuity. This meant no longer having to pass your accumulated fund to an insurer to provide you with a predetermined income; including a survivor’s income and guarantee period if requested at outset. It meant you could retain investment control and potentially secure a better death benefit position for your intended beneficiaries.

The flexibility of drawdown was then further enhanced by the removal of a minimum and maximum level of income to be taken each year giving full control as to when and how much is to be withdrawn. The ultimate tax-efficient option, which some platforms and providers like Transact can offer, is to phase the taking of PCLS and income on as frequent as a monthly basis, thus keeping as much of the fund in the pension tax-advantaged environment.

Once in the decumulation phase of taking benefits from a pension, the impact of each withdrawal on the fund will vary depending on the prevailing economic environment. So, where a fixed monthly amount is being taken, the proportion of the fund used will be lower where investment performance has been strong compared with when performance has suffered. For some there may be a desire to maintain the amount of each investment in terms of the number of units or shares held and taking a fixed amount will not always ensure this is achieved when performance of the fund is being negatively affected. However, it is possible with Transact pensions to request that any natural income generated is ‘swept’ in much the same way as happens with ISA and GIA accounts. This is useful for clients as they navigate the current economic environment, and are perhaps looking for ways to generate income but preserve capital.

So, if capital preservation of the pension fund is a priority for IHT planning purposes then the ability to sweep income will achieve this and will save constantly having to review and update the amount being taken as market conditions and investment performance fluctuate.

1. Introduction
2. Transact Online (TOL) – Recent Enhancements
3. Transfer Due Diligence Pension Scams
4. Consumer Duty Actions
5. Over 54% of Investor Clients have Logged in in the Last year
6. Share Class Conversion
7. Transact- BlackRock MPS Update
8. Dealing with Pension Income Payments in Times of Uncertainty
9. Fund Changes
10. Interest on Cash Deposits
11. Transact Events 2023