Income drawdown instead of a pension annuity?
Income drawdown is an alternative to buying a pension annuity for those up to the age of 75. The pension fund is invested and assumes some exposure to investment risk. Individuals can draw an income by taking out small portions of their fund, and are required to buy an annuity by age 75.
Drawdown is only viable for larger pension funds: the Pensions Commission suggested a
minimum of £100,000. This would currently amount to less than 5 per cent of funds.
Providers are developing products that look to add characteristics of standard annuities to drawdown products or add drawdown characteristics to an annuity. Several such products are either on or close
to the market.
