Strategy

Key benefits / considerations

Phased Drawdown

• Pays some of the income in a tax efficient manner, as part is derived from tax-free cash.
• Pension income can be paid on a flexible basis, depending on client’s requirements.
• Maximises benefit on death if client dies before age 75, as some of their fund is ‘uncrystallised’.

Income Recycling

• Move funds out of a ‘crystallised’ environment into an  ‘uncrystallised’ one.
• Maximise death benefits before age 75 in the remaining ‘uncrystallised’ fund.
• Further tax-free cash can be generated from the ‘uncrystallised’ fund.
• Normally tax neutral for income/contributions.
• Take care to ensure contribution limits aren’t  exceeded (as they will be subject to annual allowance).
• Ensure client doesn’t exceed their lifetime allowance.
• Income can be recycled but there are restrictions for tax free cash recycling **.

Recycling to a spouse / partner’s pension

• Helping to build their own pension pot.
• May help both parties use their personal allowance in retirement (when drawing upon individual’s fund).

Cascading wealth down the generations

• Taking income and paying it into a child’s pension plan.
• Can be a highly effective way of passing wealth to them.
• Income tax treatment assessed on the ‘child’.
• If the child (likely to be an adult) is higher rate taxpayer, appropriate tax relief received.
• Can be both income and inheritance tax efficient from an overall family perspective.