Retirement Planning

Pension Drawdown and Annuities

When it is time to retire, should you buy an income (an annuity) or draw an income from your retirement pot? Prismatic Wealth will advise you the best route.

Pension freedoms have given you more choice when it comes to deciding what you want to do with your retirement savings. Historically, in order to access your benefits, you will have had the option of buying an annuity or moving into a pension drawdown.

Pension drawdown is still an option, but now you have a greater level of flexibility on how you draw benefits. We’ve put together the below table to show you if you should go for a pension drawdown or annuity.

 

Drawdown

Annuities

Flexibility & Control

You have complete control, accessing as much of your money whenever you like.

After you have purchased an annuity you cannot change your decision.

Security

There is no guaranteed level of income. Your investments within your SIPP remain invested and can increase or decrease in value.

Typically this will last you for the remainder of your life and regardless of how the markets perform.

Your Choice

SIPP means you can choose from 2,500+ funds plus hundreds of trusts, ETFs and UK shares.

Every provider offers different rates on different types of annuities. We provide expert advice to help you make the best decision.

Value

SIPPs and funds charge an annual fee, although returns could be higher with drawdown than an annuity.

You pay a one-off purchase for a guaranteed income that usually lasts until the end of life.

What Happens When I Die?

Your pension can be passed onto beneficiaries as a lump sum or as an income. The money could be subjected to tax depending upon age at death.

Typically, there are no additional payments unless you purchase a join life or guaranteed period annuity.

Health & Lifestyle Benefits

Your lifestyle, health and wellbeing does not affect your level of income

Health conditions and prescribed medicine can result in a higher level of income when purchasing an enhanced annuity.

Drawdown

Withdrawals you make are subject to income tax. With guidance and our expert advice, we can ensure that this is managed in the most tax efficient way as possible, leaving you in the best financial position possible.

The remainder of your fund remains invested in appropriate funds for your risk profile.

An annuity could still be an option for you - especially if you don’t want the risk associated with investment of drawdown plans.

When it comes to retirement planning and pensions – it is important to get the best expert advice. That’s what we’re here for, Prismatic Wealth - your local financial adviser.

Things such as your marital status, health and income needs will all play a role in deciding what is the best option for you. Drawdown or Annuity.

You might want flexibility when drawing your pension income, or you may prefer a set income each month. These are all things we will work with you on in making the right recommendations to you.

Even if you are already retired, we can still review existing pensions arrangements that may already be in drawdown. We can assess your current circumstances and ensure that the level of income you are taking is appropriate. It may be that you would prefer increased flexibility in regards to taking income or you may just want to increase the current income you receive each month. Regardless of this, we can help you make the most of your benefits.

 

 

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