Page 68 - Rooftops Summer 2019

Drawn to Drawdown? If so, take care
Following the pension changes introduced in 2015, thousands of retirees have chosen to use income drawdown to access their pension funds.
To summarise, income drawdown (or Flexi-Access Drawdown as it is now known), is the method of withdrawing income payments or lump sums from your pension, whilst keeping your fund invested for the long term. Prior to the changes in 2015, the main method of providing a retirement income from your pension plan would have been to purchase an annuity, a much less flexible option but offering a guaranteed income
payable for life. The option to draw a fund flexibly prior to the rule changes in 2015 was restricted; a) you needed a large pension fund and b) you needed to seek advice to access drawdown products. The new rules swept away these restrictions, meaning that there are more options for all, however, care is required. The difference is that the new rules place the responsibility on the individual and it is easy to make strategic mistakes.
According to a study carried out by the Financial Conduct Authority published in 2018, since 2015 over 1.8 million pension plans have been
accessed for the first time on a flexible basis, whether this is using income drawdown or choosing to withdraw the whole fund as a cash lump sum. The figures have slowed over the years, dropping from 415,000 pension pots in 2015 to around 270,000 in 2017-2018, but drawdown remains a popular choice, especially when wanting to take a tax- free lump sum without a regular income payment.
We would all agree that being able to take a flexible income in retirement is great, as we are generally living longer and are likely to have different working lives to our parents and grandparents.
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