Annuities, Drawdown, ASP reviews
Welcome to the Income Drawdown Section!
When approaching retirement and thinking about income drawdown it is important to look at all the factors. Look into death benefits, flexible drawdown, new rules, comparisons with annuities, tax free cash, the best providers, and IHT.
If you take an annuity young (especially early retirement) income may be much lower than if you went into Drawdown and took the annuity older. There are also inheritance tax benefits to drawdown. As with all investment decisions you must balance risk and reward . Income from drawdown is at the mercy of fund performance. ID is normally only appropriate if you have £100K+ in your pension pot.
A feature of income drawdown or an ASP is the fact that they need to be monitored closely at all times and reviewed regularly. You should always take a close look at your plan every 12 months to:
- Take stock of the amount you are withdrawing. Large withdrawals end up draining the fund faster than you may think.
- Analyse the investment strategy to ensure that it is working.
- Make sure you know exactly how much the fund must grow in order to meet your minimum income requirements.
- Find out if any adverse medical conditions you may be suffering from entitles you to receive a greater level of income.
- Compare your fund to an annuity and decide whether to play it safe and purchase one for guarantee income.
It is imperative that you look at the above information or else you could be losing hundreds or even thousands of pounds in retirement income. There is also the issue of ensuring your spouse is looked after financially. Failure to constantly review your pension plan under drawdown means you may only discover that you are missing out when it is far too late to act. Timing is everything and acting too late could cause you to miss out on great annuity rates or else you may fail to leave drawdown when your fund was at its peak.
With annuities, you have only one choice to make. Once this decision is made, the annuity will be set up and you will receive a constant stream of income into your bank account for the rest of your life.