The good and the not so good things about drawdown
Steve Butler
Managing Director at Pension Potential | Digital Retirement Advice | Compare Annuity Rates
The good things about drawdown
Tax management
You could withdraw your tax free cash entitlement over a number of years, or withdraw a mix of tax free cash and income to control what tax you pay and when. The pension will also remain outside the scope of Inheritance Tax.
Growth potential
The amount in your pension could increase in value over time as it remains invested.
Keeping your options open
You don’t need to stay in drawdown for ever. If you decide that a guaranteed income is a better option, you can use your fund to buy an annuity.
Not-so-good things about drawdown
Running out of money
There are no guarantees with drawdown! You could run out of money altogether. It’s important to make a plan so your income is sustainable over your lifetime. We can help you with this.
State benefits and debt
If you get any income-related State benefits such as Universal Credit, taking cash could affect the amount of benefits you get. Your cash will be taken into account when working out your benefits. Also, if you have debts, your creditors can get at any cash you take out of your pension.
Pension contributions
As soon as you have received any taxable income from drawdown, the amount that can be paid into pensions reduces from ￡60,000 to ￡10,000 a year.
Management costs
Because your pension savings will remain invested, there will continue to be management costs. There may also be additional costs associated with paying you an income.
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6 个月Thanks for explaining simply Steve Butler. The complexity and number of potential pitfalls to consider with pension drawdown, seeking professional advice is key!