ICEA LION INCOME DRAWDOWN FUND
What is an Income Drawdown Fund?
An Income Drawdown Fund is a contractual agreement between you and an insurance company. Here, you deposit a lump-sum payment(s), and in exchange, draw a regular income from the deposit(s) you made into this retirement fund.
The balance that remains in your account continues to get invested. This is not to be confused with an annuity which gives you guaranteed payouts for the rest of your life, or for an agreed period of time.
In an income drawdown, you determine how and when you want to be paid as your periodical income, unlike an annuity where the amount is predetermined and based on the amount you wish to invest. Also, the amount you are paid out periodically depends on the performance of the markets where your money was invested. This depends on the amount you choose to take out on each periodic withdrawal, and your lifespan.
Key Features Of The ICEA LION Drawdown Fund
Benefits Of The ICEA LION Drawdown Fund
What Are The Key Features Of The ICEA LION Drawdown Fund?
- Flexibility: You have the liberty to determine the frequency of withdrawal (monthly, quarterly, half yearly or annually), the timing of payment (end of month or on a specific date) as well as the amount per withdrawal. The fund also allows you to withdraw a larger portion of your money, for instance if you require funds for an emergency. This is aside from the scheduled payment structure you selected and is limited to three times in a year.
- Top-ups & Deferments – The fund gives you the option to top up at future dates or defer receipt of regular income to a later date, if you don’t need it at the time.
- Duration of the Fund – According to the Insurance Act, an Income DrawDown minimum period is 10 years. This means although you are able to draw income immediately, you are required, by law, to stay in the fund for at least 10 years.
- Options after mandatory 10 years: If your still have a balance in your account after the mandatory 10 years from the date of commencement of the drawdown, you have these three options:
- Continue with the income drawdown for whatever number of years you choose
- Purchase an annuity
- Withdraw your cash as a lump sum
- Limit of 15% Annual DrawDown amount – The amount of income you can draw from your fund is subject to legally allowed limits. The law allows you to withdraw an income subject to a maximum of 15% per annum of your outstanding account balance.
- Regulation & Governance – The Income Drawdown Fund is registered and regulated by both Retirement Benefits Authority (RBA) and Kenya Revenue Authority (KRA). We provide you with access to your statements to show performance of your investment.
What Are The Benefits Of The ICEA LION Drawdown Fund?
- Tax benefits: The funds moved from a retirement saving scheme to start an Income Drawdown plan are tax exempt. However, this benefit is not available when one decides to take their retirement benefits as a lump sum
- Investment Income & Bonuses: You continue to enjoy investment income while still drawing from your funds. Your fund earns a minimum guaranteed interest of 4% per annum. At the end of the year, you also receive a bonus interest amount over and above the guaranteed 4% depending on market performance. For the insurance sector, this usually ranges from 4%-8% per annum.
- Switching Between An Income DrawDown & An Annuity: As much as the Income DrawDown minimum period is 10 years, to mitigate the risk of outliving the fund/investment you may purchase an annuity at the point you deem appropriate, even before the end of the 10 year period.
- No Loss of Capital Investment – The amount you put into an income DrawDown is guaranteed an interest of 4% per annum meaning, you cannot lose your initial investment (capital).
- Investment Expertise by Professionals – ICEA LION Life Assurance Company Limited, the approved issuer (founder) of the Income Drawdown Fund is a leading East African Insurer meaning that your investment is managed by expert insurance & investment professionals
- Transfer to Beneficiaries – In the unfortunate event of the demise of a pensioner, the fund can be used to provide a source of income to the nominated beneficiaries either by continuation of income drawdown arrangement or purchase of an annuity. Alternatively, if they opt out of these two, then the balance will be paid to the nominated beneficiaries as a lump-sum.
What Else Do I Need to Know About the ICEA LION Income Drawdown?
- Members Assume the Investment Risk: On taking up an Income DrawDown, one agrees to the possibility that the investment income could fluctuate depending on the performance of the markets where the funds are invested
- Longevity Risk – As mentioned, an Income Drawdown could expose you to the risk of outliving your fund. This is because one may keep drawing from it until it is depleted before the time you anticipated. However, you can guard against this possibility by ensuring that the fund is reviewed annually to prevent unplanned depletion. You can also purchase an annuity before the fund is completely drained.
- Eligibility to join an Income Drawdown – At ICEA LION, you can join the Income Drawdown Plan upon early retirement (from 50 years to the normal retirement age of a scheme), normal (60 years or as defined by the scheme) or late retirement (65 years or as defined by the scheme). The age of retirement (early, normal and late) varies from one retirement scheme to the next.
- Fund Structure – The Income Drawdown funds are held and invested jointly by a registered scheme that is established as a trust and is a separate legal entity from ICEA LION Life Assurance Company Limited. The fund also has an appointed corporate trustee (ICEA LION Trust Services Ltd) that oversees the operations of the scheme on behalf of the members.
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