The advantages of drawdown?

Ryan Medlock: I think the advantage of drawdown is undoubtedly the flexibility. So, we know there’s no rules, there’s no limit, in terms of the amount if income that can be taken from a drawdown plan. That can obviously be used to meet the needs on an individual basis. I think one of the other key aspects of drawdown in flexibility is to do with intergenerational planning.

Obviously, when you take out an annuity, for example, and we know, at that point, that money is officially leaving the pension system, but on the drawdown, on death, the pension pot can just be passed down through the generations in a tax-efficient pension wrapper. Now, we know the majority of clients are going to look at spending their pot in retirement, but for some clients, the pension pot, in drawdown, can be used as an effective IHT mitigation tool. Drawdown has continued to outpace annuity sales in the region of three-to-one.

I think it’s definitely a case of, as the pot size grows, so does the popularity in drawdown, and what’s perhaps more interesting is, we’re about to enter a phase where we’re going to see roughly about 800,000 people per year, across the UK, hitting the age of 55, and that is going to be a trend which pretty much continues for the next three decades. So, I think that is really a catalyst for drawdown to become even more popular as we go throughout this phase. Well, there are a lot of differences between the accumulation and drawdown phases. So, if we think about all of those inter-related risks and issues which are specific to drawdown. So, I’m talking about things like sequence and risk, income sustainability, capacity for loss.

These are risks and topics, issues clients wouldn’t previously have had to understood in the accumulation phase. Now, all of these can have a really, really big impact on clients in drawdown, so I think it’s really, really important that advisors help their clients understand these risks and issues, bring them to life and help the client.

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