Please note that the following is for information purposes only. You should always seek financial advice before making any financial decisions.
What is Drawdown?
Drawdown allows you to keep your funds invested whilst taking an income and keep you in full control of your money. You do not give it to an annuity provider to pay you, you pay yourself from your own fund.
You can take up to 25% as a tax-free lump sum upfront and take an income from the remainder of your fund. Your pension savings remain invested and continue to benefit from any investment growth – if you are able to achieve the same level of growth as the level of income you are taking then your fund will never run out as you will only be taking out the growth.
An additional benefit of drawdown is that the funds can be passed onto your beneficiaries – it doesn’t have to stop at one generation, your children can pass on any left over funds to their children and so on.
When is drawdown the right option?
Right for you if:
You are comfortable taking some investment risk.
Income can be varied, which may assist in tax planning.
Your family can benefit from the full value of your pension fund if you were to die.
Wrong if you:
Want the security of a fixed, guaranteed income for life.
If you are unsure about takings risks then flexible income may not be the best option for you. You could consider a fixed income for life instead
Pension income could be affected by interest rates at the time you take your benefits. The tax implications of pensions withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
The value of your pension can go down as well as up and you may get back less than you have invested.