Should I Go Into Income Drawdown?
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.
This group of people wish to utilise their tax-free cash benefit and also want to start receiving a steady income. However, they would rather go into drawdown or ASP rather than purchase an annuity.
The above group need to ensure that the value of their pension pot remains high. This means they should not be placing huge amounts of money into investments as their retirement age approaches in case it falls in value. A cautious investment strategy involving bonds may be the best approach. If you are one of the above group, you will probably have a fund worth more than £150,000 before the tax-free cash is withdrawn.
If You Have Other Forms Of Retirement Income
Those who have a fallback option can afford to take more risks with their money in order to get it to as high a level as possible before retirement. They should be made aware that their entire fund could disappear through bad choices but are happy to take the risk with the knowledge that other investments are there to fall back on.
Who Is Able To Go Into Income Drawdown?
Income drawdown with a SIPP is possible for anyone over the age of 55. Please look for professional advice if there are elements of this form of investment that seem confusing. Although an independent financial advisor will cost money, they could save you a fortune in the long run and are an important and prudent investment.
Is It Possible To Go Into An ASP With A SIPP?
Yes, but you must set up income drawdown with your SIPP before you turn 75. Once you reach that milestone, your pension plan will instantly be transferred to an ASP for you.