Pension Drawdown a Quick Explanation..
Pension drawdown gives you a level of flexibility to take the income the way you want and when you need it. The remaining pension fund will stay invested and hopefully, continue to grow, and importantly return the remaining fund value to your loved ones when you die.
What is the difference between purchasing an annuity and Pension drawdown?
This simple example shows how it works…
When purchasing an annuity, the growth rates are currently around 2.1%.
£100k lump sum buys you £2,100 a year but this a guaranteed payment, however, this almost at an all time low.
Pension Drawdown gives you the ability to get a return far beyond this, and in a world where equities have returned closer to 7% per annum in the last 30 years. If you achieved 7% return (net of fess) you would receive £7,000 a year, which is excess of 3x the amount of an annuity! The income you receive can fluctuate with the investment return of your pension.
Pension drawdown will pass the remaining pension funds to a beneficiary on death, whereas an annuity stops on death and the insurance company keep your remaining pension value to themselves, and there is no legacy to pass on. If you die before the age of 75, the whole pot can be passed on tax free if left in a Flexible Access Drawdown.
Get professional qualified advice..
If your pension is worth over £30,000 the government recommend that you get advice. It’s really important to get professional, expert advice. By completing the form below, this is the 1st step to getting great advice you can rely on. Pensions Advice UK can provide you with an expert Pension Drawdown adviser who is qualified and certified.