unsecured pensions.

An Unsecured Pension (previously known as ‘Drawdown’) is an increasingly popular alternative to the purchase of an annuity.  It offers a tax-free, flexible income spread across investment in cash, bonds and equities.

With an Unsecured Pension, the pension holder has the opportunity to make income withdrawals from their pension fund when required. This means that the capital value of the fund can fluctuate up and down as it is subject to investment risk, but the remaining fund can be used to buy a lifetime annuity at any time.

Part of the pension fund can be taken as a tax-free lump sum, with the maximum generally being 25% of the fund value.

The income is subject to income tax but the remaining part of the invested pension fund will continue to enjoy the favourable tax environment offered by pension schemes. At age 75, the policy holder must use the remaining pension funds to either purchase a lifetime annuity or if eligible, enter into Alternatively Secured Pension (ASP), which is in essence a more restricted version of Unsecured Pension.

What you need to know
  • An alternative to annuities that employees need to understand
  • USP is available up to the age of 75. After this point, an employee would need to purchase an annuity or move to alternatively secured pension (ASP)
Features
  • Employees retain control of their pension fund while taking income from it
Advantages
  • Flexible
  • Pension fund remains invested allowing for capital growth throughout retirement
  • Tax-free income can be taken if carefully timed phased withdrawals taken
  • Income can be varied year-on-year, giving individuals control of their retirement income to suit their changing needs
Disadvantages
  • Market risk. The pension fund can fall in value as well as rise which may also affect the benefits that may be taken from the fund
  • Financial stability and certainty are not as profound as for an annuity because no guarantee is provided

 

investing with WEALTH at work.

The investment system from WEALTH at work has a unique structure that allows us to create tailored investment strategies for Unsecured Pension funds.

We use established investment principles to construct balanced portfolios using the three key components of our unique investment system.

These are:

  • Cash for liquidity and immediate payments
  • Bonds held directly and to maturity for stability and income generation
  • Equities as a hedge against inflation so that the portfolio can establish a solid foundation to provide the required income

Using these asset classes is not unique in pension management and is in fact the way a Defined Benefit Pension Scheme may invest for the long term stability of income for all of its members.

However, it is only by using the technology and significant economies of scale brought about by being part of one of the world’s largest asset management companies that we are able to achieve this for the private investor.