Page 62 • The HERALD • 20th April 2023 v THE HERALD - INDEPENDENT AND PROUD OF IT v ASK A PROFESSIONAL DRAWDOWN, ANNUITIES OR BOTH by Michael Osman, Oyster Financial Planning MAKE SURE YOUR RETIREMENT STRATEGY MEETS YOUR NEEDS AND GOALS It’s important to make a well-informed decision when it comes to deciding what to do with your pension pot: drawdown, annuity or a combination of both. Making the right choice will a ect your retirement for many years. Drawdown gives you freedom and exibility, allowing you to choose your annual income, whereas annuities provide steady income and security. For those who want both, they can purchase an annuity with part of their pension whilst keeping the rest in a drawdown agreement – giving them the best of both worlds. e decision of whether to use drawdown or annuities can be a complex one, and professional advice is essential. Depending on your circumstances, either option may be suitable, with some preferring the security of knowing their income will remain stable for life, while others nd the greater exibility of drawdown more conducive to their retirement plans. ANNUITIES provide guaranteed lifetime income, but they also carry risk; if you die shortly a er taking out an annuity it means that you won’t bene t from the full value that you paid for upfront. is can make them unsuitable for those with shorter life expectancies compared to those who are expected to live longer. e current rates available on annuities may be attractive when compared to those in the recent past, and this can be an incentive for those previously deterred by low returns. e bene ts of an annuity include long-term security, since the income is guaranteed for life and cannot be a ected by uctuations in investment returns or other market factors. Plus, some policies guarantee indexation which means that the pension will rise with in ation over time. is helps to ensure that retirees have su cient funds to maintain their lifestyle going forward. However, there are also downsides to consider when deciding whether an annuity is suitable. e income is xed and cannot be adjusted, so if your circumstances change in retirement and you require more funds it may not be possible to increase the amount you are receiving. DRAWDOWN can provide more exibility and control over how your money is managed in retirement. Drawdown is an increasingly popular option for retirees to receive an income during their retirement. is method of taking an income allows individuals to access their pension fund in a tax-e cient way, as withdrawals are only taxable when they exceed the Personal Allowance. e main advantage of drawdown for retirees is that it o ers more exibility than other options such as annuities or lump sum payments. Retirees can take out whatever amount they require, when they need it, and don’t have to commit to xed payments over time, allowing them the freedom to make their own decisions on how they wish to use their pension savings. Another bene t is that any money le in the drawdown pot will not be liable for Inheritance Tax. is is bene cial for those who wish to leave a legacy for their bene ciaries, as the remaining investment can pass directly to them without being taxed. On the other hand, choosing drawdown does come with some risks. Retirees should consider that markets can potentially be volatile and there may be no guaranteed income from investments. Withdrawing too much capital can also leave you exposed should you live longer than anticipated. It’s important that individuals have an understanding of how they plan to invest their pension savings. Additionally, if retirees take too much out of their drawdown pot then they could face he y tax bills. Overall, it’s important that professional advice is taken before deciding upon a retirement strategy. Ultimately, the right strategy should be tailored to the individual’s needs and circumstances. For some people, a combination of drawdown and annuities may provide the best balance between security of income and control over withdrawals – we can help to determine which option is most suitable for you. Making sound nancial decisions requires due diligence and taking into account all relevant factors so that your retirement goals are met in the most e cient way possible. erefore it is important to consider both drawdown and annuities when planning for retirement and professional advice is key to making an informed decision. By taking into account all relevant factors, you can make sure your retirement strategy meets your needs and goals. Get in touch with Michael at Oyster if you want to discuss your retirement position. Call: 02380 848410 or email: enquiries@oyster nancialplanning.co.uk
RkJQdWJsaXNoZXIy MTIyNzI=