For those customers willing to take investment risk, income drawdown provides an opportunity where you could receive considerably more income than you would from a conventional annuity. Our case study below demonstrates how a couple could get 38% per annum more using income drawdown over an annuity.

When it comes to using your pension savings to provide you with a retirement income, quite naturally most people want the most they can get. A conventional annuity will provide you with an income based on the annuity rate at the time you take it – most importantly an annuity is guaranteed to provide you with an income for the remainder of your life.

Furthermore your specific lifestyle and / or medical history could see you receive an enhancement to your annuity income. We have full details on how to get an enhanced annuity on this website. You should always consider that an annuity may be the most suitable product for your needs.

For some people their need for income dwindles as they get older. This is typically due to a reduction in holidays, going out and the reduction of a more active lifestyle. Many people take the view that they would be better served by getting the most out of their pension fund while they are younger, even if it means they take the risk that at some point in the future their income will fall.

This flies in the face of the argument of linking your annuity income to an index such as the Consumer Price Index (CPI) where the income increases each year. The aim with this approach is to maintain the spending power of the annuity income. Many customers nevertheless reject index linking their annuity income as the income you receive when you first start the annuity is considerably lower than a level annuity that doesn’t increase. Based on many recent cases, it normally takes 15 years or more for the income you would receive from an index linked annuity to catch up with a level annuity.

Given that, in the majority of cases, the remainder of your pension fund after tax free cash will have limits on how much of it you could receive each year as income, many people take the ‘bird in the hand’ approach and prefer options that see them receive the majority of their pension fund returned to them as quickly as possible.