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Income drawdown can be considered as an alternative to annuity plans. Similar to annuities, the income drawdown concept has been introduced for the benefit of retired individuals. Pension annuity is common amongst individuals who are approaching their retirement. An annuity is usually adopted to convert a retired individual's pension funds into regular and fixed source of income. However, with income drawdown the concept differs slightly, as the invested pension fund is not utilized to obtain guaranteed income. The concept of pension fund is to reinvest in an array of assets in order to obtain varying income out of this fund.

Income drawdown can be considered as an alternative to annuity plans. Similar to annuities, the income drawdown concept has been introduced for the benefit of retired individuals. Pension annuity is common amongst individuals who are approaching their retirement. An annuity is usually adopted to convert a retired individual's pension funds into regular and fixed source of income. However, with income drawdown the concept differs slightly, as the invested pension fund is not utilized to obtain guaranteed income. The concept of pension fund is to reinvest in an array of assets in order to obtain varying income out of this fund.

Variation in income through income drawdown As said above, in case of income drawdown the income received may vary considerably. Income that can be obtained out of an Income Drawdown scheme may vary every year between a set minimum and maximum limit. Usually a minimum payout received can be as low as 0 whereas the maximum limit may be up to 120% of the pension. These figures are computed based on regulatory tables introduced by Government Actuaries Department, as Government Actuaries Department or GAD is the body that regulates these financial schemes.

However, income drawdown facility can only be continued until the age of 75; post 75 the drawdown scheme is usually terminated and the money is transferred to ASP abbreviation of Alternative Secured Pension. One also has an option to buy the traditional annuity plan in order to receive regular income after termination of Income drawdown scheme.

Considerable benefits of income drawdown

There are numerous benefits that urge retiring individuals to opt for income drawdown. One of the significant factors is that this enables you to buy annuity at any time when you noticed that the rates are significantly favorable. You may also utilize in invested funds to help you purchase your desired annuity scheme. In case investment growth is noticed on the residual capital, bearing the phenomenon that annuity rates increases with the growing age, an investor can be benefited by purchasing higher pension annuity scheme. Unlike many other retirement schemes where nominee does not receive deserving amount on death of the investor, the income drawdown concept offers full residual fund to the nominee or dependent.

There are three options that the eligible receiver can choose from.

* The dependent or spouse have an option of obtaining lump sum amount usually subject to a 35% tax charge * The authorized can also wish to continue withdrawing income through the same scheme. * The entitled individual can buy an annuity scheme with the potential residual amount.

However, it should also be noticed that these factors may vary according to the different aspects such as terms and conditions, rules etc.

There are people who still prefer buying an annuity than opting for an income drawdown investment plan. To reason this fact it can be said that income drawdown can be risky as the value of the pension fund can decrease or increase. In the course to compute the risk involved Critical Yielding is important. However, one of the most important factors is to read the terms and conditions accurately while buying income drawdown scheme.

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