Wherever you are on your pension journey, download this valuable guide written for the Prudential, to find out why drawdown has overtaken annuities as the default for those taking income from their pension pot.
Read This Guide To Check Out Whether Annuities, Drawdown, Or Both, Might Be Right For You
Get To Grips With Annuities And Drawdown In This Helpful Guide
In 2014, Prudential commissioned well-respected pension expert Billy Burrows to write a guide entitled You and Your Pension Pot When You Retire. It looks at annuities and drawdown among other things. Following the introduction of pension freedoms, the guide was updated in 2016.
Billy has spent more than 20 years advising clients and advisers on all aspects of annuities and drawdown. His success has largely been due to the fact that throughout his career, he’s developed a number of techniques that have helped him explain complex retirement options, such as annuities and drawdown in a simple way.
In the introduction to the guide, Billy says:
When I was asked by Prudential to write an easy-to-read guide about the new pension freedoms last year, I didn’t want to write just another paper warning about the dangers of taking your pension as a cash sum or running out of money. I wanted to write a paper that will help you make better decisions about how best to take cash or income from your pension pot when you reach retirement age.
There are many challenges on the horizon not least the impact of Brexit and the prospect of continued low interest rates and uncertainty in the financial markets. However, with the right help and advice, the new flexible pension options can be used to take advantage of any new opportunities arising in the future.
Click the image below to download a copy of the guide.
Over the years, Billy has published many articles. Here’s a recent one on drawdown, which compares the benefits with annuities. It’s entitled Drawdown - Good, Bad Or Indifferent? Three Ways To Judge A Drawdown Plan. Billy writes...
There are many different ways of arranging a drawdown plan. Different levels of income, investment strategies and charging structures all mean it is very hard to compare drawdown plans and begs the question: How can advisers and their clients judge whether a drawdown is good, bad or indifferent?
Working out what is happening inside a drawdown plan may be harder than first imagined. In the days before pension freedom, it was good practice to benchmark drawdown against annuities - for instance, over the long term, would drawdown pay out more income than an annuity? This comparison might have been crude but at least there was something to aim at.
A more sophisticated analysis would consider the trade-off between possibly lower income during retirement but a lump-sum legacy to the family on death. Today, the comparison with annuities is less prevalent and it is therefore appropriate to consider other ways of judging if a drawdown is delivering a good outcome.
There are arguably three ways in which a drawdown plan can be judged:
1. Is it meeting the stated objectives and expectations?
2. Is the chosen level of income sustainable over the longer term?
3. Is the investment strategy suitable?
For answers to these three questions, read the full article on annuities and drawdown.
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