Drawdown gives you a lot of flexibility around how you take the money from your Account.
LifeSight offers drawdown whereby your Account remains invested while you also draw an income from it. This can be a regular monthly income, or you can take out sums of money as and when you want.
Because your money is still invested, there is the opportunity for it to grow and provide a greater income in retirement than you might get with an annuity. However, there is also the risk that you spend more than your investments make, and so run out of money.
If you choose to take an income from your drawdown arrangement, the most you can pay into any pension arrangement and receive tax relief on will be reduced (see Contribution limits for more information).
You also keep the option to use your fund to buy an annuity at a later date if you want to.
When thinking about drawdown, you will need to consider the amount you intend to withdraw and how long you wish for your money to last. It's also worth taking into account any investment gains (or losses) experienced throughout this period, plus any charges you incur for managing your funds.
To help you, LifeSight provides a tool in drawdown which lets you see the age at which your money is estimated to run out based on your chosen withdrawal and investment choices. You can model different scenarios until you find one that meets your expectations in retirement.
Taking cash withdrawals may have implications for people who may be entitled to means-tested benefits.
If you decide to use your fund for income drawdown then any funds that are left can be passed on to your chosen beneficiaries when you die. If you were to die before age 75, the remaining amount could be passed on tax-free. After 75, they may be able to continue with the drawdown account and any income taken would be taxed at the recipient’s marginal rate.