Income Drawdown Advice And Review
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.
The purpose of these income draawdown articles is to give you as much information as possible but you must make your own decisions. Independent pension specialists are available to offer professional advice. It is important to utilise their skills because your pension may well be your biggest ever asset and it certainly affects the rest of your life.
You should only think about income drawdown if you:
- Have other investments which means you can afford the value of the pension to fall.
- Need flexible death benefits.
- Are not concerned about losing money and have no problems with a high risk strategy.
- Believe that the market will improve quicker than annuity rates will fall.
- You need the flexibility it offers as part of your long term financial plan.
Comparing Options One More Time:
Investment Linked Annuity
Alternatively Secured Pension (ASP)
Every option except ASPs must have tax-free cash taken at the start. ASP tax-free cash does not exist so must be taken before you turn 75.
Security Of Income:
Only the Lifetime Annuity guarantees your money.
With the Lifetime Annuity, your cannot change once you make your choice. Investment Linked Annuities have a varied income but the type of annuity cannot be changed. It is possible to switch funds or revert back to a normal annuity.
You can withdraw as much as you like from Income Drawdown up to a maximum limit. You can buy a normal annuity whenever you like or else you can change to an ASP once you turn 75.
An ASP also enables you to buy a lifetime annuity and also allows freedom of withdrawals up to a maximum limit.
Choice Of Investments:
There is no choice of investments with a Lifetime Annuity and Investment Based Annuities require you to choose from the provider’s own range. The other two options enable you to invest your money where you like.
All options require reviews except Lifetime Annuities.
Income Drawdown has flexible benefits as does an ASP though it is not as flexible as income drawdown. Neither of the other two options offers any death benefits.