What is Pension Drawdown?

VIDEO: Pension Freedom rules give savers more flexibility over how to spend their retirement pot. Here's how pension drawdown works

Holly Black 30 October, 2020 | 11:32AM

 

 

Holly Black: Welcome to the Morningstar Investment Board. I'm Holly Black. Today, we're talking pension drawdown. Now, drawdown is a word you would have heard a lot more in the last few years since the government introduced pension freedoms. And this meant that people could have a lot more choice about how they use the money they had saved for retirement. So, previously, you'd have your pension pot, and unless it was a huge amount, you would have to buy an annuity with it. And that is the thing that gives you a guaranteed set income for life. Drawdown lets you manage your own money. So, you can leave this pension pot invested in the stock market so it can continue to grow even after you stop working. And then, you can take drawdown either ad hoc lump sums from it, or a regular income and that will fund your retirement.

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About Author

Holly Black  is Senior Editor, Morningstar.co.uk

 

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