There are probably three categories of people who should consider Income Drawdown:
- You have another source of income, maybe you continue to work but on a part-time basis or have another pension that pays a comfortable level of income. You may consider that taking some risk with your pension is worthwhile.
- You want to take your tax free lump sum from your pension but do not want to take an income. The only way you can do this is through Income Drawdown
- You are in poor health, need to take an income but you want your spouse or children to benefit from your pension should anything happen to you. Ordinarily, you might buy an annuity but without spouses benefits the annuity would die with you after any guarantee period expires.
With drawdown you can take an income from the pension fund and after your death any fund remaining can be used to buy an annuity for your spouse, continue in drawdown or a lump sum could be paid (subject to tax) to your children’s pensions or your estate.
Drawdown is not suitable for people that have no other source of income to rely on. Ideally, you should have a good level of income elsewhere or sufficiently large enough pension to be able to take some risk without worrying that a modest fall in your pension would create financial difficulties.