A recent report6 has highlighted the problems that pension savers could face in investing their pension pots without taking advice.

Income drawdown is where you leave your pension pot invested and take an income directly from it, instead of using the money in your pot to buy an annuity from an insurance company. As the rest of your pension pot remains invested, it will continue to benefit from any investment growth.

Since pension regulations were updated in April 2015, more and more retirees have opted to take flexible withdrawals from their pension funds, and the Financial Conduct Authority has reported that drawdown has become the most popular retirement choice.

The importance of good advice

Whilst drawdown offers flexibility, there are risks that you need to be aware of. Unlike an annuity the amount you can take as income isn’t guaranteed. Your pension fund remains invested, which means that you are exposed to share price movements as markets rise and fall. This makes it even more important to take good professional advice. Without it, you could find your income level falls, and you could even risk running out of money at some point.

In drawdown, there are risks involved both in taking out too little or too much. If you draw too little you might not have sufficient to cover your living costs, taking out too much could restrict your pension pot’s ability to provide an income throughout your retirement. This is where we can provide valuable input, helping you formulate your drawdown strategy and ensuring that it’s kept under regular review.

6Royal London, Nov 2018

The value of pensions and the income they produce can fall as well as rise, you may get back less than you invested.

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