Income withdrawal, also known as income drawdown or pension drawdown is an option that allows you to take a taxable income directly from the pension fund, without buying an annuity.
The plus points
· This would suit people entering retirement when annuity rates are especially low. Your fund remains invested and you take money directly out of the fund, using it as income.
· There is no minimum amount, which makes income withdrawal reasonably flexible. If you don’t need the income, you can stop withdrawing it at any time.
· The risk is that your income could be much lower in later years than it otherwise would have been. Success depends on strong investment growth and interest rates not moving in the wrong direction.
· There are limits to how much income you take in this way. From 6 April 2011, the maximum is equivalent to 100% of the income you would get from a standard annuity.