Income Drawdown

Following the changes to pensionseffective from 6th April 2006, income drawdown schemes are known as unsecured pensions.

This type of scheme is suitable for anyone up to the age of 75 wishing to take income from their pension fund without committing to the purchase of an annuity for life.

Flexible fund

The main difference from other annuities is that income may be taken and the remaining fund continues to be invested in a range of equity-based assets. The type of investments chosen is usually determined with the help of a financial adviser depending on attitude to risk and the level of income required.

This does allow some control over the performance of the fund and the income taken from the fund is flexible.

Greater risk

This type of plan carries more risk than many other more straightforward annuities however, in the event of death the remaining fund can be left to dependents whereas with an annuity, the fund would revert to the insurancecompany.

Of course an annuity guarantees an income for the whole of life, regardless of how long the annuitant lives while a drawdown scheme may not last the lifetime of someone who goes on to live for a very long time.

There are pros and cons with any type of pension and the right choice for any individual however depends on their age, state of health and their financial circumstances and needs. It is essential to take professional financial advice when taking retirement benefits as making the right decision will affect income for life and possibly that of any dependents that may be left after death.

Our independent experts can help you to make the right decision and understand the implications of the recent changes to pensions. To talk to an adviser about your situation, please complete our Quick Enquiry Form and we will arrange for you to be contacted.

How do I find out more about annuities?

Please click here to read the guide to pension annuities.

Because some of the terms relating to this product are confusing, please also visit our glossary of terms for a full explanation of the jargon.