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Pension drawdown and annuities - what's the difference?
Annuities and drawdown are the two main ways of using your pension pot to fund your retirement.
But how are they different? What option is best for you? And what risks do you need to be aware of? Our Money blog team has put together a guide explaining everything you need to know about the two options. First, let's take a look...
DRAWDOWN This is a way of managing how you spend your pension pot - and is a much more flexible way of accessing your pension than its main alternative, the annuity. It allows you to take sums out gradually while leaving the rest invested.
Pension providers and investment platforms offer the product, which is generally available to people aged 55 and over (rising to 57 from 2028) with a defined contribution pension, and not final salary or defined benefit pensions. How does it work? You usually start by taking up to 25% of your pension pot tax-free.
The rest is moved into what's called a "drawdown account.
Amir Nisi
Creative and experienced content writer with 6+ years of experience lazy to create unique content strategy for News5 to turn website visitors into customers.
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