Ltd is authorised and regulated by the Financial Conduct Authority (FCA) to provide advice and arrange non-investment motor, home, travel and pet insurance products (FRN310635) and is registered in England and Wales to Greyfriars House, Greyfriars Road, Cardiff, South Wales, CF10 3AL, company number 03857130. Ltd for the introduction of non-investment motor, home, travel and pet insurance products (FRN 610689). Which? Limited is registered in England and Wales to 2 Marylebone Road, London NW1 4DF, company number 00677665 and is an Introducer Appointed Representative of the following:ġ. Which? has analysed the pension drawdown plans offered by more than 25 pension companies and fund supermarkets.įind out more in our guide to comparing pension drawdown plans and charges. These accounts are most prominently provided by fund supermarkets - brokers that offer investors the chance to hold a combination of different investment together in one place. If you do decide to go down a DIY route, the accounts that are likely to offer the widest investment choice are self-invested personal pensions, or Sipps. Do I need to take financial advice?ĭIY investing is increasingly popular, but we think income drawdown is one area where the expertise of a professional financial adviser can really add value.Ī financial adviser will take into account all of the factors covered here, and many more, in order to tailor a plan to your objectives and your attitude to risk.įind out more: How to find a financial adviser - the comprehensive Which? guide What are Sipps and fund supermarkets? This involves selling your portfolio gradually over time. If you need more income than is produced naturally by your portfolio, or if you have a preference for 'growth' investment because you think they are better overall prospects for the future, the alternative approach is known as 'selling down'. It would typically be possible to generate around 3% or 4% in this way from a combination of dividend paying shares and lower risk corporate bonds. Of course, this means your income would be limited to the amount paid by the investments you make. In theory, this approach means you can take an income from your portfolio, leaving your capital invested in the hope it maintains its value or grows over time. This involves buying assets that pay an income such as shares, which pay dividends, and corporate bonds, which pay interest. ![]() One approach is to take a 'natural income' from your investments. There are two common strategies adopted by those seeking to generate an income from their investments in income drawdown. What are the different ways of taking an income? With pension drawdown, it's you who has to estimate how long you are likely to live - and you who takes the risk that your money will need to cover a longer-than-expected period.ĭata from the Office for National Statistics (ONS) reveals that an average man turning 65 in 2022 would live another 19 years, with a 65-year-old woman living another 21.Īnd further analysis reveals that retirement could feasibly last 40 years. When an insurer does this, it estimates how long it thinks people your age will live and it takes on the risk that you might live longer than your savings last. ![]() When you hand over your pension to an insurance company, it is offering you a guaranteed income for life - regardless of how long you live. The great attraction of annuities is that they provide certainty. These give you access to a whole portfolio of shares, bonds or both, through a single investment.ĭifferent funds and trusts tend to specialise in either specific geographical areas, such as the UK or US, or in types of assets, such as dividend-paying shares.įind out more: The Which? portfolios - our tool can help you find the right mix of investments How long will I need to invest for? You can also invest using funds such as unit trusts or investment trusts. In theory, different assets move in value at different times and for different reasons, meaning you won't be over-exposed in any one area. You can invest in a range of different asset classes. The key is diversification - not putting all of your eggs in one basket. ![]() When investing in the stock market, there are tried and tested principles that you can follow to make sure you aren't taking more risk than you are comfortable with. Where can I invest my pension in income drawdown?
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