In a new column, we’re asking you, the Which? Conversation community, to help answer people’s financial queries. This month, it’s what to do with your pension pot when you retire.
You’ve got two choices for converting your pension savings into an income that’ll last through your retirement. But making the right choice can be tricky.
In general, most people will choose an annuity. This is a financial product that will assess your age and health, then calculate and pay you a guaranteed income until you die.
But what if you want the potential to grow your money even more, and have some flexibility with how much you take each year? Well, that’s where an income drawdown comes in.
Drawdown allows you to leave your money invested in the stock market, while you take an income from it. You can take a maximum of 120% of what you would have got from an annuity, so you have the opportunity to take a lot more income when you need it the most.
What advice would you give?
A Which? member wrote to us recently asking about income drawdown:
‘I’m 60 and have a small self-invested personal pension (Sipp) worth about £15,000. I would like to take income drawdown from this fund, but all the adverts I’ve seen refer to a minimum pot of £50,000.
‘Is there any way I can do this? What are the tax implications?’
Can you help a fellow reader find a solution to his pension quagmire? Do you think it’s worth entering into a drawdown scheme given how much he has in his savings?
We’ll be posting our own answer at the end of the week, but in the meantime, we’d love to hear your views and experiences.