Pension drawdown options
When you reach the age of 55, you get a choice of what to do with the money in your pension pot and which option will be best for you depends on a lot of factors. Some people opt to access their money via pension drawdown. Unlike purchasing an annuity, with pension drawdown, the money stays invested in the funds and you withdraw money to live on as you go. This method has benefits and drawbacks like all the other options and this is where we can help people approaching retirement age. We can look at your circumstances and listen to your aspirations for your retirement as well as your preferences to help you make a decision about the most appropriate way to access the money in your pension.
As with other ways to access your pension money, the first 25% you withdraw is tax free but after that, using pension drawdown, you can choose to take out all your money at once, withdraw regular amounts each month to live on or take lump sums as and when you need them. The money remaining in the pension stays invested on the stock exchange so there is a chance to keep increasing the amount left if the funds perform well. That does mean there is a risk, however, that the value of the funds could drop and leave you with less money.
The main benefit to using pension drawdown is the flexibility it offers you as you can choose how much you withdraw and when, as well as managing your tax liability. Obviously, the fact the sums still invested can increase is another benefit. This may not be the best option for everyone though, not just because of the risk the value of the funds could fall, but because people worry that they may take out too much money too early on and be left with too little to live on. Some people prefer the guarantee of a yearly income you get with an annuity. Factors such as how much money you have in the pension pot, what your outgoings and other incomes and investments are and how you are planning to spend your retirement will partly dictate which option would be best for you but, of course, your preferences regarding risk etc. will play a big part. Not only can we advise you on the best option for accessing your pension money, we can help you choose the best way to manage your drawdown if you go down that route.
Risk Warning: – A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation