Unsecured Pension

USP

What is it? 

This allows members to defer purchasing an annuity and instead take income withdrawals from the fund.  The Government Actuaries Department produce tables, to show the maximum income that can be taken, based on long dated gilt yields and the members age and sex.  The level of income taken must be reviewed against GAD rates every three years.

Who is it for?

An alternative to purchasing an annuity is through the use of Unsecured Pension (USP). This option, also known as Pension Fund Withdrawal, allows you to take up to 25% tax-free cash sum from your pension fund and then take (or "draw down") an income from the remaining funds. Whilst you are taking an income, the funds remaining in the plan are invested according to your investment risk profile in order to meet your financial objectives.

You can continue unsecured pension until you are 75, when you must either purchase an annuity or go into Alternative Secured Pension (ASP).

An Overview:  Advantages & Disadvantages:

Due to the complexities, charges and risks involved, pension fund withdrawal is normally only suitable for people with funds in excess of £100,000, however, each client should be assessed on a case by case basis. 

What is the tax position?

Any pension income paid will be treated as earned income and therefore subject to income tax at the individual’s marginal tax rate.