Unlocking Pension Cash – Inflation-linked annuities

Quick update: The Financial Times published an article last week, explaining how inflation-linked annuities can increase the amount of cash you are able to release from your pension using “flexible drawdown”. A brief excerpt from the FT article

“Investors have more chance of being able to withdraw large sums from their pension funds as inflation-linked annuities will now be counted towards the income needed to qualify for a ‘flexible drawdown’ facility.

Since April this year, investors who have a minimum of £20,000 in secure pension income have been able to move into flexible drawdown: a new pension arrangement that does not have limits on the amount drawn from a fund, unlike capped drawdown.

Up until last week, income from annuities linked to the Retail Prices Index (RPI) was not included in the list of “secure income” that can count towards the £20,000 Minimum Income Requirement (MIR).

Tens of thousands of individuals hold these index-linked annuities to protect their income against the effects of inflation, which can erode real spending power.

However, in an apparent u-turn over what counts as secure income, the government has now added index-linked annuities to the list of qualifying income sources.

Flexible drawdown providers said this decision would boost the number of retirees who can take advantage of the new pension freedoms.”

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