Income Drawdown

Our Income Drawdown plan pays you an income while leaving the remainder of your pension fund invested for potential further growth.

• Allows you to take control of how and when you receive your retirement income, so you can retire fully or semi-retire
• You can choose from a range of investment funds, but remember the performance of the fund(s) will affect the income you receive
• Talk to your adviser and find out how to apply for an income drawdown plan.

The flexible income solution for your retirement

Our Income Drawdown plan is an alternative to an annuity. It gives you flexibility with your retirement income options by paying you an income while leaving the remainder of your pension fund invested for further growth potential.

What is income drawdown?

Income drawdown - also known as ‘pension fund withdrawals’ - is a way of taking an income from the money you’ve built up in your pension fund. You can transfer money from any pension fund to an Income Drawdown plan, but you’ll need a minimum of £50,000 to set up the plan.

You can use the income you receive from an Income Drawdown plan to retire fully or semi-retire and supplement your earned income. While you’re making withdrawals from your pension fund, the remainder of your fund continues to be invested, giving it the potential for growth, free of UK income and capital gains tax. However, the value of the fund can go down as well as up and is not guaranteed.

How does it work before you’re 75?

You can choose to take income from your pension fund from age 50 (this will change to age 55 in 2010). Most personal or stakeholder pensions allow you to take a tax-free cash lump sum, normally up to a maximum of 25% of the fund value, so, the first step is to decide how much tax-free cash you want to take, if any. Then, the rest of your pension fund can be invested in an Income Drawdown plan and this is then used to provide you with a regular income.

Income taken in this way is known as an Unsecured Pension (USP). The Government sets a maximum limit of how much you can take as income in any 12-month period from a USP. However, there's no set minimum, which means you could actually delay taking an income if you want to and simply take your tax-free cash lump sum. The amount of yearly income you take must be reviewed at least every five years.

What are your options after you’re 75?

From age 75, income drawdown plans are subject to different Government limits and become known as Alternatively Secured Pensions (ASPs). If you're already receiving income from a Norwich Union Income Drawdown Plan, when you reach the age of 75, it will become an ASP. But you will still be able to receive a regular income while the rest of your fund remains invested. There is a minimum amount you have to take as income from an ASP.

If you haven't already taken your tax-free cash lump sum, this option will no longer be available to you from age 75. The remaining value of your personal pension fund must be used to either buy an annuity - which will give you a guaranteed income for the rest of your life - or transferred to our Alternatively Secured Income Drawdown plan.

What are the benefits?

• Income choices. A Norwich Union Income Drawdown plan gives you a choice of how to take money from your pension fund, allowing you to take control of how and when you receive an income. This includes the option to take withdrawals from contracted-out funds.
• Investment choices. Our plan offers you a wide selection of investment funds, to enable you to tailor your choices to your individual investment needs. You can choose from a range of Norwich Union funds and funds from other leading investment companies, covering a broad range of key asset classes, markets and fund management styles. As with all stock market related investments, values can fluctuate up or down and you should be aware that the value of your investment, and any income you receive from it, can go down as well as up.
• Tax-efficiency. Your Norwich Union Income Drawdown plan will grow free of UK income and capital gains tax. Corporation tax is paid on dividends received from UK shares.
• Reviews. Each year we’ll send you a statement showing the withdrawals you’ve taken from your plan and its current value. We recommend that you review your plan each year with your financial adviser to ensure you don’t take more income from your plan than can be sustained by your pension fund.
• Transparent charges. We take all charges from your fund each month and you can clearly see what they are. The charges cover the cost of advice, fund management and administration throughout the life of your plan.

Please note that this information is based on our understanding of current tax laws. The laws relating to tax may change in the future.

Things to think about

• The performance of the investment funds will have an impact on the amount of income you receive. If the investments perform poorly, the level of income may not be sustainable.
• If you decide at a later date to buy an annuity, you may receive a lower level of income.
• An annuity may be a more suitable option if you want the security of a guaranteed income for the rest of your life.
• Income drawdown is a more expensive option than annuity purchase.

Is an Income Drawdown plan right for you?

An Income Drawdown plan may be suitable for you if you’re aged between 50 and 72 on set-up of the plan and you have a minimum of £50,000 in your pension fund(s) - after taking any tax-free cash (up to 25% of the value of the plan). You must discuss your retirement options and take advice from a financial adviser before taking out an Income Drawdown plan. If you’re not sure whether it’s the right plan for you, we can help you decide.

What are the charges?

Each time you transfer money into the plan, it’s set up as a separate pot of money, known as an arrangement. We apply an Annual Fund Charge (AFC) for managing each arrangement under your plan. Depending on a number of factors, the Annual Fund Charge can therefore be different for each arrangement you hold. Find out more about the Annual Fund Charge. Additional charges may apply if you choose to invest in certain investment funds.

Other useful information

• Find the answers to some frequently asked questions
• Understand your attitude to risk/return and which funds might suit you best

How to apply

Find out more about how to apply for a Norwich Union Income Drawdown plan. The first step is to talk it through with your financial adviser to make sure it’s the right type of retirement income plan for you. If you don’t have an adviser, you can find one in your area at www.unbiased.co.uk.

WC03043 09/2008