Pension Drawdown allows you to withdraw funds from your pension pot while keeping the rest invested. It offers flexibility and control over how you access your retirement savings.
How Pension Drawdown works:
You can usually take up to 25% of your pension pot as a tax-free lump sum. The remaining 75% stays invested, providing potential for growth.
Speak to an ExpertFlexibility: Tailor your withdrawals
Potential for Growth: Your investments can continue to grow
Inheritance Options: Remaining funds can be passed on to beneficiaries
Market Risk: Your funds are subject to market fluctuations and there are no guarantees of growth or against any investment losses
Ongoing Management: You need to manage your withdrawals in such a way that you can ensure your funds will last throughout your retirement
Tax Implications: You can withdraw as much or as little as you need but you need to be mindful of the tax implications
An Annuity is a financial product that provides a guaranteed income for life or a fixed period in exchange for a lump sum from your pension pot.
How Annuities work:
You use part or all of your pension savings to buy an annuity. In return, you receive regular payments, either for a set number of years or for the rest of your life.
Speak to an expertGuaranteed Income: Provides financial stability with regular payments
No Market Risk: Your income is not affected by market changes
Different Options: Choose from lifetime annuities, fixed-term annuities, or escalating annuities that increase over time
Inflexibility: Once purchased, annuities usually cannot be changed
Lower Potential Returns: You may not benefit from investment growth
Inflation Impact: Fixed payments may lose value over time due to inflation
Choosing between pension drawdown and annuities depends on your financial situation, risk tolerance, and retirement goals. Here’s a quick comparison:
| Feature | Pension Drawdown | Annuities |
|---|---|---|
| Flexibility | High | Low |
| Income Security | Variable | Guaranteed |
| Investment Potential | Ongoing | None |
| Inflation Protection | Potentially yes | Depends on annuity |
| Market Risk | Yes | No |
| Management | Requires active management | No management |
Pension Drawdown allows you to withdraw funds from your pension pot while keeping the rest invested. It offers flexibility and control over how you access your retirement savings.
How Pension Drawdown works:
You can usually take up to 25% of your pension pot as a tax-free lump sum. The remaining 75% stays invested, providing potential for growth.
Speak to an ExpertFlexibility: Tailor your withdrawals
Potential for Growth: Your investments can continue to grow
Inheritance Options: Remaining funds can be passed on to beneficiaries
Market Risk: Your funds are subject to market fluctuations and there are no guarantees of growth or against any investment losses
Ongoing Management: You need to manage your withdrawals in such a way that you can ensure your funds will last throughout your retirement
Tax Implications: You can withdraw as much or as little as you need but you need to be mindful of the tax implications
An Annuity is a financial product that provides a guaranteed income for life or a fixed period in exchange for a lump sum from your pension pot.
How Annuities work:
You use part or all of your pension savings to buy an annuity. In return, you receive regular payments, either for a set number of years or for the rest of your life.
Speak to an expertGuaranteed Income: Provides financial stability with regular payments
No Market Risk: Your income is not affected by market changes
Different Options: Choose from lifetime annuities, fixed-term annuities, or escalating annuities that increase over time
Inflexibility: Once purchased, annuities usually cannot be changed
Lower Potential Returns: You may not benefit from investment growth
Inflation Impact: Fixed payments may lose value over time due to inflation
Choosing between pension drawdown and annuities depends on your financial situation, risk tolerance, and retirement goals. Here’s a quick comparison:
| Feature | Pension Drawdown | Annuities |
|---|---|---|
| Flexibility | High | Low |
| Income Security | Variable | Guaranteed |
| Investment Potential | Ongoing | None |
| Inflation Protection | Potentially yes | Depends on annuity |
| Market Risk | Yes | No |
| Management | Requires active management | No management |
To determine the best option for your retirement, you should:
Consider your expected expenses, lifestyle, and financial responsibilities.
Decide how comfortable you are with investment risks and market volatility.
If you expect a long retirement, an annuity can provide stable income for life.
Our UK Pension Specialists can tailor a retirement plan that ensures you’re making the most of your pension funds.
While both Pension Drawdown and Annuities give you a way to access your pension, the real question is: which one’s right for you?
Each option works differently and depending on your lifestyle, goals, and attitude to risk, one could suit you far better than the other.
Not sure where to start? You don’t have to figure it all out on your own – book your FREE consultation with our FCA-Authorised Financial Advisers in our Preston Farm Planning Rooms.
Book your Free MeetingNot necessarily. Turning 55 gives you access to your pension under UK pension freedoms, but whether to transfer your investments or drawdown depends on your long-term Financial Plan. You can continue growing your pension pot so there’s potentially more money to enjoy later.
It really depends on your personal circumstances. Taking the lump sum can give you flexibility and funds for immediate needs, but it also reduces your remaining pension pot and the funds you’ll have further down the line. So, before many any big decisions about Pension Drawdown, we’d recommend speaking with one of our UK pension specialists who can help you weigh up the benefits and the risks.
Buying an Annuity at 55 might not be the best option, as annuity rates increase with age. Other options, like income drawdown, may offer more flexibility. However, if you want a guaranteed income for life, an annuity could be suitable. If you’re unsure though, we can help you explore all your options and decide what’s best.
Under current UK taxation rules, you can withdraw up to 25% of your pension tax-free. Any further withdrawals are taxed as income, so it’s important to plan carefully to avoid paying more tax than necessary.
If you are 55+, accessing your pension is a big decision. But with the right information, it doesn’t have to be complicated.
Our free ‘Accessing Your Pensions’ guide makes it easy to understand your options, avoid common mistakes, and help you feel confident about when and how to take your pensions.
Whether you have Personal Pensions, Defined Benefit Pensions or Defined Contribution Pensions, we’ve got you covered.
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