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Phased Income Drawdown (Phased Unsecured Pension)

Phased Unsecured Pension (previously called phased income drawdown) allows you to control your retirement fund and convert it gradually over a number of years into income. This income can be made up of wholly PCLS (tax free cash) or part PCLS and part Unsecured Pension.

The balance of your pension fund remains invested and could provide you with the possibility of a higher income in the future. This will depend mainly on how much income you take out of the pension fund and future investment returns.

Advantages
• The remaining pension fund that is not being utilised for Unsecured Pension can be returned to your beneficiaries free of tax on your death before age 75.
• With Unsecured Pension you can utilise the PCLS to provide an income without the immediate need to purchase an annuity.
• You retain investment control of your pension fund.
• As you get older annuity rates may rise and offer the chance of providing you with higher income.
• With this contract you will to some extent be able to adapt your pension income in the future to reflect changes in your personal circumstances.

Disadvantages
• Increased flexibility brings increased costs and the need to review arrangements on an on-going basis.
• There is no guarantee that your income will be as high as that offered under the conventional annuity route.
• Deferring the purchase of the annuity does not guarantee a higher level of future income, as annuity rates can go down as well as up and the value of your pension fund may go down as well as up.
• Either a move into alternatively secured pension or the purchase of an annuity must be made by age 75 at the latest with any remaining pension fund.

Suitability
Phased Unsecured Pension is most likely to suit individuals who either want to retire gradually or wish to utilise their PCLS as income. It is generally accepted that the potential disadvantages and the inherent risks involved require the individual client to be a relatively sophisticated investor, who is capable of fully understanding the risks. Given this, the contract can be used as a tax planning tool, a means to accessing PCLS without having to take the full taxable income and as a means for offering greater flexibility with both income and death benefits.

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