Pension Drawdown | Frequently Asked Questions

What happens to the remaining pension fund once Pension Drawdown has commenced?

The remaining funds stay in the pension and continue to receive benefits as before. It is also possible to continue making contributions into the pension with the same tax relief. Drawdown payments can be made each year, calculations are done at least once every 5 years to determine the amount of permitted Drawdown. From April 2011 rules come in to force which mean the policy holder must stop pension Drawdowns and buy an annuity with the remaining funds once they reach the age of 77. Up until this date transitional rules will apply.

I can't remember who my pensions are with or how much is in them?

The Government offers a free online pension tracing service through their website at www.direct.gov.uk for personal and employer pensions. Alternatively you can try contacting your previous employers as they should have details of any pensions you had with them, depending on how long ago you left their service.

What happens to the policy if the policy holder dies before making the full Drawdown?

The next of kin or whoever has been specified to benefit from the pension can decide to continue with the pension Drawdown or they may wish to buy an annuity with the funds. Alternatively it is possible to draw out the lump sum, however, this would incur tax of 35%.

Do all types of pension schemes allow pension Drawdowns?

Not all pensions will allow pension Drawdowns. All UK personal pensions, including stakeholder, Self Invested Personal Pensions (SIPPs) and defined contribution money purchase schemes can be unlocked for the purpose of a pension Drawdowns. Most company pensions including final salary and occupational pensions can either be accessed directly or have the option to be transferred to a personal pension, to enable it to be accessed.

However, it is not usually possible or advisable to try to unlock a company pension scheme while you are still working for that company and are still eligible for contributions. The majority of public sector, i.e. local government or public service pension schemes can also be accessed for pension release schemes. Some types of defined benefit schemes such as Section 32 Buy Out Bonds S32 (pension plans that have already accepted a transfer from a defined benefit pension scheme, such as a Teachers' pension scheme) can't be accessed or transferred to a pension release scheme. State Pensions can not be accessed for a pension release.

Pension Drawdown - Frequently Asked Questions