Drawing from your pension
Recent changes to pension regulations have seen a new ‘pension freedom’ with a number of new options on how you are able to draw your pension income now available.
In the past, upon retirement the vast majority of people when they retired used their pension pot to purchase an annuity.
An annuity allows you to exchange your pension pot for a guaranteed income for the rest of your life. Despite securing a guaranteed income it can come at a cost and any money left in the annuity when you die could potentially revert back to the provider, rather than to your family. However, an annuity may well still be the correct option for you, by giving you a regular income and structure in retirement.
Under the new pension freedoms, individuals will be given more opportunity to make more use of a flexible drawdown arrangement. Rather than moving your pension pot into an annuity, flexible drawdown keeps your pension invested and allows you to withdraw an income from it as you see fit. This can be highly advantageous in a number of ways, as it gives your pension pot the opportunity to continue growing, gives you flexibility to vary how and when you take your income and with careful planning that upon death it can be passed on to future generations.
An annuity and a flexible drawdown arrangement are just two of the options, however, and choosing which of these and the many other possibilities is right for you is an important and complicated process.