You’ll need to choose a mix of investments that is suitable for your financial requirements and risk tolerance. With a pension drawdown, you also need to spend time choosing and monitoring your pension investments. If your pension investments decline in value, or the income they produce doesn't keep up with inflation, you may have to lower your withdrawals so that you don't run out of money later on in retirement. You need to ensure that you have enough income to last your entire retirement. This means that you need to plan your income withdrawals carefully. One major disadvantage of pension drawdown is that your income is not guaranteed. What are the disadvantages of pension drawdown? The fact that you can take 25% of your pension savings as a tax-free lump sum is also a benefit. This means that you can continue to grow your pension savings after you have retired. And unlike an annuity, you are not locked in to a plan for your entire retirement.Īnother benefit of pension drawdown is that you can keep the majority of your pension savings invested while in retirement. You can set up regular monthly or annual income payments, or take ad hoc payments when you need to. You can take income when it suits you and adjust the amounts you withdraw depending on your income requirements or the performance of your pension investments. One of the main benefits is the high level of flexibility you have. Pension drawdown offers a number of benefits. What are the advantages of pension drawdown? At any time, you can use your pension savings to buy an alternative retirement income product. With pension drawdown, you are not locked in for life. You also have flexibility over the amounts you withdraw and the timing of the withdrawals. There are no limits in terms of how much you can withdraw at once from your remaining pension savings. You can then make withdrawals from the remainder of your pension balance that can be used for retirement income. Once in drawdown, you can take up to 25% of your pension pot as a tax-free lump sum. You can move your pension pot into drawdown from the age of 55. With pension drawdown, you’re able to keep the bulk of your pension savings invested when you reach retirement age, while withdrawing an income from your pension to fund your retirement. Pension drawdown, or ‘flexi-access’ drawdown as it is sometimes called, is a way of taking your money out of your pension to generate income in retirement. In this article, we look at how pension drawdown works and highlight the advantages and disadvantages of this pension decumulation strategy. When you put your pension into drawdown, you keep the majority of your pension savings invested, while making flexible withdrawals from your pension pot for income. Pension drawdown is a popular way of generating an income from your pension in retirement.
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