Annuities and Drawdown
There are essentially only two types of products available to convert your pension pot into an income – Annuities and Drawdown. There are different kinds of both however, so you should understand the differences and how they might affect you.
You do not have to take the annuity on the company with which you have built your pension and should shop around for the best annuity rate, this is called the open market option and everyone is entitled to use it.
Investment Linked Annuity
Fixed Term Annuity
Flexi Access Drawdown
You choose funds to invest in that match your income objectives and attitude to risk and set the income you want. The income you receive may be adjusted periodically depending on the performance of your investments.
Once you’ve taken your tax-free lump sum you can start taking the income right away or wait until a later date.
You can also move your pension pot gradually into income drawdown. You can take up to a quarter of each amount you move from your pot tax-free and place the rest into income drawdown.