Aviva Adviser: Income Drawdown

Pension Portfolio on the Aviva Platform offers flexi-access drawdown on a single or phased basis and gives your clients complete flexibility with their pension fund in retirement.

Flexi-access options

Single and phased flexi-access drawdown options available through Pension Portfolio on the Aviva Platform

Tax planning

Income drawdown options that allow you to maximise your clients' tax position

Flexibility

Full flexibility for your clients on how they access their retirement funds, to suit their individual needs

Details

Why Income Drawdown?

Income Drawdown through our Pension Portfolio gives you options that work for your clients - whether they require light-touch tax planning or a more hands-on approach.

Options available:

Phased flexi-access drawdown
Single flexi-access drawdown
Capped drawdown (for clients already in capped drawdown prior to 6 April 2015 only). Unfortunately, clients are not able to designate uncrystallised funds for capped drawdown into arrangements created to receive a transfer. Self-Select phased drawdown is not available for capped drawdown clients.

The Money Purchase Annual Allowance will apply as soon as clients take taxable income through flexi-access drawdown.

Phased drawdown

	How it works
Self-Select phased drawdown	• Offers regular income as a mix of tax-free lump sum, with or without taxable income. • Tailor Self-Select to optimise your clients’ tax bands/allowances. • Your client must take 25% tax-free lump sum, but they don't have to take all the associated taxable income immediately. So you can use taxable income to ‘fill’ a tax band and top up to the income level needed with tax-free lump sum. You can flex this approach when needed, for example if your client’s other incomes change. • You could choose to minimise crystallisations, to protect Pension Commencement Lump Sum (PCLS) growth. We automatically calculate the minimum crystallisation needed to pay your client’s chosen income amount. • This flexibility allows you to demonstrate expertise in reducing the tax your clients pay.

How it works

Self-Select phased drawdown

• Offers regular income as a mix of tax-free lump sum, with or without taxable income.

• Tailor Self-Select to optimise your clients’ tax bands/allowances.

• Your client must take 25% tax-free lump sum, but they don't have to take all the associated taxable income immediately. So you can use taxable income to ‘fill’ a tax band and top up to the income level needed with tax-free lump sum. You can flex this approach when needed, for example if your client’s other incomes change.

• You could choose to minimise crystallisations, to protect Pension Commencement Lump Sum (PCLS) growth. We automatically calculate the minimum crystallisation needed to pay your client’s chosen income amount.

• This flexibility allows you to demonstrate expertise in reducing the tax your clients pay.

Single drawdown

	How it works
Single drawdown	• Can be a suitable option where your client needs a tax-free lump sum at the outset. • Clients can crystallise the whole fund and take 25% as tax-free lump sum. Otherwise, if they don't need all of the tax-free lump sum immediately then they can crystallise just part of the fund. 25% of the crystallised amount is paid as tax-free lump sum, and the remaining 75% is moved to the post-retirement account. • Taxable regular income payments or lump sums can be paid from the post-retirement account. Any withdrawals will be taxed at the client’s marginal rate of tax.

How it works

Single drawdown

• Can be a suitable option where your client needs a tax-free lump sum at the outset.

• Clients can crystallise the whole fund and take 25% as tax-free lump sum. Otherwise, if they don't need all of the tax-free lump sum immediately then they can crystallise just part of the fund. 25% of the crystallised amount is paid as tax-free lump sum, and the remaining 75% is moved to the post-retirement account.

• Taxable regular income payments or lump sums can be paid from the post-retirement account. Any withdrawals will be taxed at the client’s marginal rate of tax.

The value of investments can go down as well as up and investors may get back less than is paid in. Tax rules may change in the future and depend on your clients' circumstances.

Facts and figures

Drawdown restrictions	Flexi-access drawdown
Minimum client age	55 (57 from 6 April 2028 unless your client has a protected pension age).
Minimum investment amount	-
Minimum amount clients must move to a post-retirement account for single drawdown	-
Ad hoc withdrawals	Yes, via the ad hoc withdrawal route on a gross basis
Payment frequency	Monthly, quarterly, half-yearly or yearly

Existing capped drawdown clients

Capped drawdown is no longer available for new clients. But if they were in capped drawdown before 6 April 2015 they can transfer that arrangement into a new capped drawdown arrangement on the Aviva Pension Portfolio and designate additional funds as required. If clients exceed the maximum GAD limits, they'll automatically move into flexi-access drawdown which will trigger the money purchase annual allowance. We can accept capped drawdown transfers, but we can't facilitate the addition of further funds into the arrangements created to receive these transfers.

What’s a pre-retirement account?

A pre-retirement account holds clients' uncrystallised funds.

What’s a post-retirement account?

A post-retirement account holds clients' crystallised funds. We use this money to pay clients' income, so we have to crystallise enough funds into this account to meet clients' income needs.

Client suitability

Income drawdown isn't suitable for everyone. There are risks and benefits which your client will need to consider. Clients will depend on you to adjust their income/tax position.

Benefits

It’s completely flexible. Clients can carry on working and use variable income drawdown to top up their income if, say, their hours drop or there's a need for more funds
Flexi-access drawdown clients can take any amount out of their pension fund, whenever they wish - even all of it
Clients can choose not to take an income at all
Self-Select income drawdown lets clients use a mix of tax-free lump sum and taxable income, tailored to their individual tax planning requirements
Clients can choose from a selection of investment options
Clients aren't locked in for life, so they can switch to another retirement income option (such as an annuity)
Clients can choose to leave their remaining pension fund (crystallised or uncrystallised) to any named beneficiary. If the client dies on or after their 75th birthday the beneficiary may have to pay tax on it
We can normally pay death benefits for clients who die before age 75 without any tax charges
Existing capped income drawdown clients have some control over the amount of income they take (subject to GAD limits).

Things to consider

The value of clients’ pension funds can go down as well as up, and may fall to less than the amount paid in
Investments must grow, if they're going to compensate for the income withdrawn and any charges. If that doesn't happen, the pension fund will be depleted – especially if the client takes a high level of income. There's a risk a client could run out of money
Taking income through flexi-access drawdown will trigger the money purchase annual allowance
There’s no guarantee that annuity rates will improve in the future. They may fall, which means there's a risk of lower income if your client is using the product to delay buying an annuity
If your client is still in capped drawdown, they will continue to need GAD reviews every three years up to age 75 and every year afterwards
A small number of clients may need to complete a tax return or apply to HMRC to reclaim overpaid tax
The remaining pension fund will continue to be charged
Tax rules are subject to change.

Pension death benefits

Passing on drawdown pension funds

Your clients will be able to nominate who they would like to receive their drawdown pension funds on their death. We will take those nominations into account when deciding who should receive death benefits. The chosen beneficiaries will then normally be able to choose whether they would like an income or a lump sum. If they leave any money within the pension on their death, that can be passed on to their beneficiaries and so on.

For a client who dies aged 75 or over, the beneficiary will pay tax on any benefits taken from the funds at their marginal rate.
For a client who dies before age 75, benefits can normally be passed onto their beneficiary free of income tax.
You can also use Pension Portfolio to administer any funds your client may inherit themselves. Beneficiary's flexi-access drawdown, otherwise known as an inherited pension, must always be held separately from pension the client has built up themselves, and will also be treated differently on their death, in terms of Lump Sum and Death Benefit allowance. Anything remaining on the client's death can, however, be passed on in the same way as the client's own pension.

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