Pension Drawdown

[jrtv]

how does DRAWDOWN work on a pension, from April 6th there are to be changes to make it easier to use, but what is it and how can you use it ?

[Lindylou]

I'm not sure about this myself - it seems complicated! But try the Pension Service website - www.thepensionservice.gov.uk or by phone, 0845 7313233.

[jrtv]

Thanks Lindylou, I have been on that site and sent them a email asking for advice on this Drawdown policy, let's see what happens !!

[Sweet G]

Hi again jrtv. You can use drawdown if it is an option on your policy. Here's how drawdown works: Upon retirement you "draw down" an amount to live on from the pension pot. Imagine you dip into your savings in a bank account to live on, well pension drawdown is the same principle; you are drawing funds from your pension pot. It allows you retain control of the pot, you can take as little or as much as you wish, your provider will tell you the precise amounts, and you can still buy an annuity at a later date if you wish. If you die whilst drawing from your pension the balance is left to your nominated benficiaries after a 35% tax charge. drawdown offers more control and flexibility than an annuity but does not offer the same certainty. Using drawdown still leaves the pension fund exposed to investment risk, although if you invest wisely this risk can be managed, e.g you can simply invest the fund in a cash deposit type fund. If you like the idea of drawdown but your current provider doesnt offer the option you will have to transfer to a provider who does. However in doing so you may lose some of the value of your pension fund in transfer penalties. Check this out before making a final decision and seek specialist advice.

[jrtv]

Thanks once again SweetG, you really know a lot , I got a answer from my insurance company and is seems you need at least �100,000 in the fund for Drawdown to be any good, so I have gone with the personal pension with a 10 year guarantee, non-escalating and single life and a Tax free lump sum, I did contact a Financial Adviser after your last post but was told he charges �150 a hour so I didn't bother, anyway thank you again.