Annuity drawdown is a combination of drawdown and annuity within one plan. This means part of your income can be guaranteed and you have the flexibility to vary the balance to suit your needs. You also have the option to switch to a conventional lifetime annuity at any stage in future, for example if market annuity rates improve, or when income security overtakes your need for income flexibility.
Annuity drawdown is ideal if you want to secure your ‘essential’ retirement income (bills, food, transport, clothing etc) at the outset of retirement and are happy to take some risk to achieve flexibility and potential growth with the balance of your pension income. It’s not as flexible as ‘flexi-access drawdown’ as there are minimum and maximum income levels, but it provides more security.
While the potential benefits of annuity drawdown might be obvious, the considerations when choosing the split of your pension income between ‘secure’ and ‘flexible’ and what degree of risk you should take can be more subtle and we recommend you take advice to see how annuity drawdown could work for you.
Who should consider annuity drawdown?
Annuity drawdown will be suitable for those who don’t need complete flexibility to access as much or as little of their retirement pot as they want from one year to the next and don’t need their whole pension to be fully guaranteed for life. Investors will want the security of knowing a certain portion of their income is guaranteed to be paid, regardless of how long they should live and are also comfortable with taking on an element of risk with the balance of their pension.