Ion Guild

Unsecured pension, also known as drawdown, is one of the retirement options you have in UK. It was introduced in the year 1995 captioned as the “Pension Fund Withdrawal”. The plan enables you to take a lump sum at the commencement where you are entitled to withdraw up to 25% of the funds you have in your pension account. At the same time you can also defer purchasing of annuity. The advantage you derive is that while your pension fund remains invested, you derive a periodical income helping your financial status without requiring any mortgage protection,

There is however a maximum limit of scale for such derivation of income. This is called the “basis amount”. The Government Actuaries Department (GAD) is the calculating authority of this amount. They determine your eligibility depending on the basis of your age and sex. The maximum limit is 120% of your annual income that could be paid to you. The limit is applicable wherever the pension fund is used to purchase one level single annuity or guaranteed income bonds for lifetime. The term “level” indicates that the annuity does not fluctuate during its lifetime.

An important thing you should know is that the GAD factors can fluctuate basing on the market interest rates. If there is fall in the interest rate on long term, the GAD might fall also. Therefore, you will have to adjust your level of retirement pensions fund drawn keeping in terms with the fluctuating GAD rates.