Typically, clients accessing Drip-feed Drawdown (DFD) will use the tax-free cash element to manage their tax position.
All clients will have a personal allowance and by taking regular payments of tax-free cash and non-taxable pension income, while using Drip-feed Drawdown, they can effectively manage the point at which they start paying income tax on their pension income.
Below we illustrate how you can use Drip-feed Drawdown to support clients with different objectives and circumstances.
Case Study 1 – Mr Smith
Mr Smith is entitled to a personal allowance of £11,500.
Objective
To withdraw as much as possible from his pension but mitigate tax by making use of his available tax-free cash as part of his income.
Case Study 2 – Mrs Jones
Mrs Jones is a 60-year-old senior manager. She wants to cut down her hours to work four days a week instead of five as she moves into retirement. This will reduce her salary from £50,000 (£41,300 net) to £40,000 (£34,300 net).
Objective
To replace her income shortfall of £7,000 net per year by using Drip-feed Drawdown.
For more information on Drip-feed Drawdown visit: scottishwidows.co.uk/DFD
This information is for UK Financial Adviser use only and should not be distributed to or replied upon by any other person.
