Pension choices: annuity vs income drawdown

When you want to access your pension pot, you have several choices. The right choice for you depends on a lot of things, such as your tax position, whether you have a partner, your attitude to risk and even your health.

This tool explains when using income drawdown can be more suitable than an annuity. Because accessing your pension is an important decision, you should also talk to one of our financial advisers for more help. Get in touch using the links below.

Income drawdown: taking out more money

To reduce the risk of you running out of money, there’s a limit on how much you can take out via income drawdown, based on the equivalent annuity you could get. This limit is regularly reviewed.

If you expect to have a retirement income of at least £20,000 a year this restriction does not apply and you can take as much of your money as you like by using flexible income drawdown, although this money will be taxed.

The types of income that count towards the £20,000 minimum include state pensions, some types of annuity and employers’ pensions. Only a small proportion of people retiring are likely to meet this requirement.

Important information

The value of investments, and any income from them, can fall as well as rise and you could get back less than you invest. References to legislation and taxation are based on current rules. Legislation and taxation may change in the future. All figures relate to the 2011-12 tax year, unless otherwise stated.