Drawdown is extremely flexible but it is not without its risks. Who could income drawdown be beneficial for?Įssentially, income drawdown could work well for people who do not want to buy an annuity. Plan your withdrawals around your other sources of income.Increase or decrease your income in line with any changes to your lifestyle.The main advantage of going into income drawdown is that your pension savings are not impacted by poor annuity rates and instead they could benefit from investment growth.Īs drawdown allows you to take an income directly from your pension, you have the freedom to choose how much income to take and when to take it. What are the benefits of income drawdown? As with any type of investment, the value may fall as well as rise, so you could end up with less than you originally invested. It is, however, important to bear in mind that while this is the desired result, it isn’t always the reality. Not seeing your capital fall in value is the desirable outcome with income drawdown plans. Ideally, you will end up with the same amount of money in your pension that you had at the outset. The idea is that you will draw out an income that is equal to the amount of investment growth on your pension fund. Going into income drawdown allows you to draw an income from your pension and leave the rest invested, with the aim that it will continue benefiting from investment growth. It was first introduced in 1995 for the purpose of preventing people from locking themselves into very poor annuity rates. While it has become a popular option for taking retirement income since the introduction of Pension Freedoms in 2015, income drawdown is not new. Income drawdown is an umbrella term that encompasses all the different types of drawdown, including capped drawdown, flexi-access drawdown, phased drawdown and tax-free drawdown.
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