A case study using the Prudential Flexible Retirement Plan
The following example is designed to represent a typical situation reflecting today’s retirement income needs. It does not relate to any particular individuals.
You should not look upon them as financial advice or a recommendation of a particular course of action. You should consider your own circumstances fully, along with your financial adviser, to help you make a decision.
Suzanne, a youthful 55, has owned the local chemist shop for many years. She wants some income from her pension fund, but not all of it.
Now that her son is taking over, she wants to take a back seat in the business and do more voluntary work in the community.
She will need to take a pay cut from the business, but doesn’t want to take a full annuity from her pension fund yet because, at her age, the pension annuity rates will be quite low and she was hoping to build up a larger fund before retiring.
Suzanne’s financial adviser explains how she can plan for a phased retirement with income drawdown.
She considers the income drawdown option, as she thinks it will give her more control over the amount of income she takes now and the investment approach that is needed to grow the fund.
Suzanne can transfer part of her pension fund at a time into income drawdown, giving her a gradually increasing income as she reduces her working hours.
She can also vary the amount of income she takes from her drawdown fund, for added flexibility. Suzanne is comfortable with balancing the need for income with the need to invest the fund so that it has the potential for growth.
She likes to keep a close eye on her investments and will work with her financial adviser to choose investments that have the potential to meet her future income needs as well as maintaining or increasing her fund value.
The examples are based on our understanding, as at March 2013, of current taxation, legislation and HM Revenue & Customs practice, all of which are liable to change without notice.
The impact of taxation (and any tax reliefs) depends on individual circumstances.
• The income drawdown (with SIPP) option gives you access to an extensive range of investment options to suit different attitudes to risk, including a range of over 140 investment funds managed by Prudential and other fund managers.
• The value of an investment can go down as well as up and the value in future may be less than the amount invested. What you get back depends on the funds chosen and how they perform.
• The value of the fund may be eroded, especially if investment returns are poor and a high level of income is taken. This could result in a lower income in the future. Please keep in mind that pension income you receive will be taxed as earned income.
To find out more contact your financial adviser.
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