Do I need advice when accessing my pension fund?

Working out your pension options means making some big decisions with long-lasting consequences. The Financial Conduct Authority* found that in their 2018/9 report, 48% of pension plans were accessed without regulated advice or guidance being taken by the plan holder which could mean that they haven't had any professional guidance on what to do with their later life funds. 

What are my pension access choices?

Income drawdown is one of two main options – along with buying an annuity.

What is an annuity?

An annuity is a financial product you buy with a lump sum from your pension savings which pays you a guaranteed regular income, either for:

  • The rest of your life (lifetime annuity); or
  • A set period, at which point an agreed maturity value will be paid to you, allowing you to select another retirement income product or take the value in cash (fixed term annuity).

There are many different features of the above products, for example an ability to continue to pay an income if you die to a significant other if you are married, in a civil partnership or to a financially dependent partner.  

To ensure you select the most appropriate product for your needs, you may want to talk to an expert to help you make the right decisions. 

What is income drawdown?

Income drawdown leaves your pension pot invested, whilst allowing you to draw an element of your fund to pay you an income. 

There are many different features of income drawdown products.  One example is, if you want regular access to withdraw smaller lump sums when you need them then these can be provided through an Uncrystallised Funds Pension Lump Sum product.

As with an annuity, you may wish to talk to a Financial Adviser to help you make the right decisions to ensure you select the most appropriate product for your needs.

What if I don’t wish to access my pension when I reach retirement?

It is also possible that when you reach retirement, you may not need to access your pension savings straight away.  If you choose this option, your pension pot will stay invested and any investment growth will continue to be tax-free, potentially providing you with more income once you come to draw on it.

When considering how you want to access your pension pots there are a number of things you may want to consider such as:

Do you want certainty and a guaranteed income for the rest of your life? 

Do you want to protect your retirement income from stock market fluctuations? 

Do want you to keep your income rising with inflation?

Do you want the flexibility to change your mind on your pension options? 

Do you have a short life expectancy?

Do you want to keep your money invested and accessible?

Are you on your own and want to leave some pension savings for your family when you die?

Do you think annuity rates might rise – and that it could be worth waiting?

Do you want flexibility to take money out as and when you want?

Do you want to take different amounts of income each year?

Are you happy to leave your money invested in the markets?

As you can see there are a lot of different considerations so you may want to take independent financial advice on the matter.

Is an annuity or income drawdown more appropriate for my needs?

Financial adviser Steve Hudson, from our trusted partner Wren Sterling said: “In some cases drawdown is more appropriate – especially where flexibility of income levels and leaving a legacy are concerned. However, for some clients annuities remain the most appropriate option.

“Clients need to be aware there are risks associated with drawdown. In a drawdown plan a client could ultimately run out of funds and therefore find themselves without additional income to their state pension later in life. This could be as a result of withdrawing an unsustainable level of income, poor investment returns or both. 

“However, an annuity income is guaranteed to continue for the remainder of a client’s life and can be written on a joint life basis to guarantee a lifelong income for the pensioner and a spouse, partner or any other chosen beneficiary.” 

Your independent financial adviser can research the entire market place to find the most attractive drawdown or annuity rate, and in some cases to arrange an enhanced annuity, paying a higher level of income if the client has health issues. 

Qualifying members** of our Member Rewards scheme can arrange an fee-free initial meeting for pensions, investments & protection advice from Wren Sterling at any of our branches or by completing the online enquiry form.

Accessing pension benefits is not suitable for everyone. You should seek advice to understand your options at retirement. 

Accessing pension benefits early may impact on levels of retirement income and entitlement to certain means tested benefits. 

The value of an investment and income derived from it can go down as well as up and is not guaranteed.


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