What is Drawdown?

The concept is to defer purchasing an annuity by taking an income direct from the fund.

The fund remains invested and the level of income can be varied, within certain limits. You are only deferring the purchase of an annuity. As explained before, you must make a further decision before your 75th birthday. At that time, you must opt either to purchase an annuity or transfer the funds to a plan which can provide an Alternatively Secured Pension (ASP). As noted earlier, ASP is subject to differing restrictions and though it may be suitable for you, which is by no means certain at this time.

The Drawdown option is generally considered the most risky, in view of the continuing investment of the fund and the potential for annuity rates to alter in deferral. It is also the most complex and potentially expensive, as it requires ongoing advice and support.

This alternative is more suitable if the individual has other sources of income, which can be relied upon if the investment performance or annuity rates worsen. In addition, a larger fund has the advantage of diversity, which can reduce the investment risk. Finally a larger fund can more easily cover the additional costs inherent in this complex alternative.

In your case the total fund is £128,728.71. The Drawdown option allows you to take the maximum tax free cash and not take any income.