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.
One advantage of purchasing an annuity is that all additional charges and fees are taken care of at the start because they are all inclusive. Once you set it up, you will never be hit with any fees and your income remains the same.
With income drawdown and an ASP, there will be various fees and charges taken away from your account each year. The providers attempt to justify these fees by saying customers are paying for flexibility. It is important that you include these fees in your calculations because your fund will need extra growth to make up for the shortfall. The term ‘critical yield’ is used to describe these charges. Also, financial advice is generally not free so be sure to include the amount it costs into your final figures.