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Drawdown key Issues

If you are serious about arranging the most suitable drawdown plan for your personal circumstances you must ask yourself three key questions:

3 Key Questions
  • Do you understand all the key issues and risks ?
  • Have you followed the 3 Golden Rules of drawdown?
  • Will you be getting the most suitable drawdown plan?

Do you understand all the key issues and risks?

Hopefully you understand the basics of retirment planning, but, if you want to re-cap please see my pages about annuities and about drawdown.

Before you make such an important decision you should make sure you understand (or your broker or financial adviser explains) some basic retirement planning issues. These include:

  • What are your objectives e.g. maximising your lifetime income, maximising potential inheritance for your family or finding peace of mind and security
  • How much investment risk are you willing or able to take? e.g. take too little risk and you get financial security but low returns but take too much risk and even though you may get high returns you stand to lose a lot.
  • What are worried about the most? e.g. risk of dying without getting the most from your pension pot, the risk of running short of income (inflation!) or even running out of income

If you have been paying attention you will notice that these are the same key issues as for annuities. This is because annuities and drawdown are different sides of the same retirment income coin. Before you decide which option is best for you should always considers these key issues.

If you want flexibility and control over your pension pot ( but don't need a guaranteed income for life) and you don't mind taking some risks, drawdown may be suitable for you.

You can’t have your cake and eat it!

One of the things that makes choosing between an annuity drawdown so difficult is that most people have more than one objective and often these objectives are in conflict. For instance; it is not unusual for people to want flexibility, control and the option to leave money to the family but they are worried about taking undue risks and perhaps running out of money.

This means there are important trade-offs – when you invest in drawdown you trade a secure income in return and when you purchase an annuity you trade flexibility and control in return for a guaranteed income for life.

You need a two handed adviser

I once had a client who said: “Give me a one-handed adviser”. He went on to explain that I kept on saying ‘on the one hand this and other hand that’, but he just wanted the answer.

I understood his frustration but as soon as I explained there was not alwaysd a single right answer and it was important to consider all the relevant options to weigh up both sides of the argument he was happy with my two-handed approach.

You too must take a two-handed approach becuase if you only look at one side of the arguement you could make the wrong decision

See my article Two-handed-advice

William Burrows

Offices in London, Northampton and Cardiff

Call: 07730 435 657

 

William Burrows / Retirement Intelligence Ltd
International House
24 Holborn Viaduct
London
EC1A 2BN
Better Retirement
400 Pavilion Drive
Northampton
NN4 7PA 

If you need help or advice - Contact us

As one of the most respected specialist retirement advisers, William Burrows and Better Retirement will be pleased to help you make the right decisions at any stage of your retirement journey.

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This website is run by William Burrows and publishes generic information on annuities, drawdown and other related retirement income matters. Any information you use is at your own risk and does not constitute financial advice.

If you require financial advice you will be advised by Better Retirement where William Burrows is authorised to give investment advice. Better Retirement Group Ltd is authorised and regulated by the Financial Conduct Authority, reference number 153420.