It’s not just the performance of the stock market that can lead to your pension pot proving insufficient though ‒ you also need to be incredibly disciplined about precisely how much you withdraw, not only for tax purposes but also to make sure that your pot lasts for the rest of your life. Should the stock markets go through a turbulent time, or simply the firms in which you have invested, then the value of your pension pot will fall.Īs a result, you may not have as comfortable a retirement as you were expecting or may have to remain in work longer than planned to make up for any shortfalls. In an ideal world, having your pension pot remain invested means that it will increase in value over time. How to access your pension: pros and cons of key strategies The cons of pension drawdown ![]() ![]() If you die before the age of 75, your family will inherit the whole pot without paying a penny in tax.Īnd if you are over the age of 75, they can take the pot as a regular income or as a lump sum and will pay tax at their marginal rate of Income Tax. If you purchase an annuity, and then die shortly afterwards, your loved ones do not get anything from your pension savings.īut that’s not the case with income drawdown. So, if you have a big purchase on the way ‒ for example on a once-in-a-lifetime holiday ‒ then you can tap into your pension pot to do so.įinally, income drawdown is useful should you pass away, particularly when compared to an annuity. Income drawdown allows you to access the money you need, when you need it. ![]() This becomes even more appealing when you consider that annuities have generally been considered to provide fairly disappointing value for money for some time.Īnother positive is the flexibility it provides. This may mean you have more money to play with in retirement to provide you with a more comfortable standard of life. One of the big selling points for income drawdown is that because the bulk of your pension fund stays invested, it can grow over time should your investments perform well.
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