Zimele Income Drawdown Plan
An income drawdown plan is a contract offered by a registered personal pension plan and involves disbursement of retirement benefits at fixed amounts, and at regular intervals. In other words, the plan enables you to create a regular and predictable income stream from your retirement benefits. According to the Retirement Benefits Authority (RBA) guidelines, an income drawdown contract is for a minimum period of ten years.
The plan is recommended for persons who have either attained the voluntary retirement age of fifty years, or the mandatory retirement age of sixty years, and would like to be paid a fixed amount of money on a regular basis. The distinguishing feature of the plan is that the income stream is derived from investment returns leaving the principal amount of your pension benefits intact at the end of the contract period.
Eligibility
- Attainment of the retirement age of fifty
- Accumulated retirement benefits in either an occupational pension scheme or an individual pension scheme. One can also transfer their retirement benefits from another pension scheme to the Zimele Guaranteed Personal Plan for purposes of initiating an income drawdown plan contract.
- The pension benefits from the income drawdown plan should not be less than the minimum pension amount of ksh. 4,802/=
Enter your Pension Savings below and see how much you would earn every month.
Features
- Monthly Income: Unlike a standard personal pension plan which is used to accumulate your pension benefits until you reach retirement age to pay you a lump sum amount, the income drawdown plan is designed to pay you a fixed income on a regular basis. The payments can be monthly, quarterly, or half-yearly.
- Growth: The remaining portion of your pension benefits is continuously invested, which helps to grow the principal. The portion of returns not distributed through the income drawdown plan is added to the principal pension benefits and paid out in lump sum at the end of the contract period.
- Convenience: The plan gives you convenience and flexibility when choosing how much to withdraw and at what frequency. More importantly, the plan gives you dignity and confidence in retirement by ensuring you are able to meet your monthly upkeep requirements and maintain your preferred lifestyle from a reliable source of passive income.
- Beneficiaries: In the event of death, the income drawdown plan benefits may be paid out as a lump sum (and taxed at the applicable rate) or the drawdown may continue to be paid to your beneficiaries until the expiry of the contract period, after which the principal amount shall be paid out to your beneficiaries.
- Tax Benefit: If you have attained 65 years, all withdrawals from the income drawdown plan are not subject to income tax. If you haven’t attained the age, the income will be taxed as shown below:
Income Brackets | Income Tax Rate |
0 – 33,333.33 | 10% |
33,333.33 – 66,666.67 | 15% |
66,666.67 – 100,000.00 | 20% |
100,000.00 – 133,333.33 | 25% |
133,333.34 – 833,333.33 | 30% |
Source: Income Tax Act
Benefits
- The plan gives a pensioner a steady and sustainable monthly income stream which enables them to maintain a comfortable lifestyle in retirement.
- The plan provides more flexibility and convenience to a pensioner compared to a typical annuity arrangement. This arises from the ability of the pensioner to choose the amount to receive and at what interval.
- A drawdown plan is an alternative to buying an annuity and allows a pensioner to leave their pension benefits fully invested while drawing an income on a monthly
- The principal is paid back in full after the expiry of the contract period, unlike in an annuity where the amount expires with the contract.
- In the event of death before the expiry of the contract, beneficiaries can continue drawing the monthly income or can choose the option of getting the lump-sum amount.
Frequently Asked Questions
An income drawdown plan is an arrangement that allows you to receive a fixed amount of money on a regular basis from your pension benefits. The payments are derived from investment returns and therefore do not reduce the principal amount of your pension benefits over time.
Income drawdown plans are used to pay you a regular income once you decide to retire, while a standard personal pension plan is used to grow your pension savings and pay you a lump sum upon reaching the retirement age.
You have the option of either monthly, quarterly, half-yearly or annual drawdown.
You can start from your 50th birthday.
The key benefit of income drawdown is that it offers greater control over your pension pot. It also makes it much easier to pass on what remains of your pension benefits after you die.
Yes, if you choose to go into income drawdown when you retire, you still have the option to take up to 25% of your pension fund as a tax-free lump sum.
Yes. However, the minimum amount that can be withdrawn on a monthly basis is currently ksh.4,308. There is no limit to what you can withdraw above this amount depending on your pension benefits. You can also choose the frequency with which you receive your payments, which can be either monthly, quarterly, semi-annually or annually.
Reference Table for Income Drawdown
Rate of Return | 9% | 10% | 11% | 12% | 15% |
Monthly Drawdown | Lump Sum Required For Monthly Drawdown | ||||
4,802 | 640,267 | 576,240 | 523,855 | 480,200 | 384,160 |
10,000 | 1,333,333 | 1,200,000 | 1,090,909 | 1,000,000 | 800,000 |
20,000 | 2,666,667 | 2,400,000 | 2,181,818 | 2,000,000 | 1,600,000 |
30,000 | 4,000,000 | 3,600,000 | 3,272,727 | 3,000,000 | 2,400,000 |
40,000 | 5,333,333 | 4,800,000 | 4,363,636 | 4,000,000 | 3,200,000 |
50,000 | 6,666,667 | 6,000,000 | 5,454,545 | 5,000,000 | 4,000,000 |
60,000 | 8,000,000 | 7,200,000 | 6,545,455 | 6,000,000 | 4,800,000 |
70,000 | 9,333,333 | 8,400,000 | 7,636,364 | 7,000,000 | 5,600,000 |
80,000 | 10,666,667 | 9,600,000 | 8,727,273 | 8,000,000 | 6,400,000 |
90,000 | 12,000,000 | 10,800,000 | 9,818,182 | 9,000,000 | 7,200,000 |
100,000 | 13,333,333 | 12,000,000 | 10,909,091 | 10,000,000 | 8,000,000 |
110,000 | 14,666,667 | 13,200,000 | 12,000,000 | 11,000,000 | 8,800,000 |
120,000 | 16,000,000 | 14,400,000 | 13,090,909 | 12,000,000 | 9,600,000 |
130,000 | 17,333,333 | 15,600,000 | 14,181,818 | 13,000,000 | 10,400,000 |
140,000 | 18,666,667 | 16,800,000 | 15,272,727 | 14,000,000 | 11,200,000 |
150,000 | 20,000,000 | 18,000,000 | 16,363,636 | 15,000,000 | 12,000,000 |
200,000 | 26,666,667 | 24,000,000 | 21,818,182 | 20,000,000 | 16,000,000 |
