Income drawdown option...

rafikiphoto

Does the team think that now is a disastrous time to embark upon an income drawdown pension?

dunstonh

Depends on your age, how long you plan to be in drawdown and how you intend to invest going forwards.

EdInvestor

rafikiphoto wrote: »

Does the team think that now is a disastrous time to embark upon an income drawdown pension?

No, why should it be?

rafikiphoto

dunstonh wrote: »

Depends on your age, how long you plan to be in drawdown and how you intend to invest going forwards.

65; up to 10 years; cautiously....

rafikiphoto

EdInvestor wrote: »

No, why should it be?

I don't know if it should which is the reason for my question. The global economic situation continues to worry me and I'd like to gather peoples views on some of the options open to me.

dunstonh

The global economic situation continues to worry me

Which then suggests you dont have the risk profile to be doing income drawdown. It is a high risk option. Especially if its your only source of income. If its not your only source of income and the less important it is for your provision, then there may still be some scope.

EdInvestor

How would you invest your pension fund if you chose drawdown?

What level of income would you take?Are you flexible on adjusting this?

What charges do you expect to pay to run the drawdown?What growth rate do you expect it to achieve?

Do you expect to live long, do you want to leave money for heirs from the pension, are you married does your wife have her own pension?

These are a few of the relevant issues.

rafikiphoto

EdInvestor wrote: »

How would you invest your pension fund if you chose drawdown?

What level of income would you take?Are you flexible on adjusting this?

What charges do you expect to pay to run the drawdown?What growth rate do you expect it to achieve?

Do you expect to live long, do you want to leave money for heirs from the pension, are you married does your wife have her own pension?

These are a few of the relevant issues.

Cautiously
The maximum allowable consistent with the yield. Yes.
I don't know.
Yes. Not a priority. Yes. No.

EdInvestor

rafikiphoto wrote: »

Cautiously
The maximum allowable consistent with the yield.

Have you compared the likely return net of charges if you follow this route compared with what you might get from an annuity, bearing in mind the need to provide for your wife?

A rough idea of annuity returns can be gleaned from the this site:

www.fsa.gov.uk/tables

rafikiphoto

EdInvestor wrote: »

Have you compared the likely return net of charges if you follow this route compared with what you might get from an annuity, bearing in mind the need to provide for your wife?

A rough idea of annuity returns can be gleaned from the this site:

www.fsa.gov.uk/tables

I have. I've used the H-L online annuity quotes facility and also received a drawdown illustration. The potential returns from drawdown seem attractive. However, with a cautious approach I'm wondering if the markets will be able to achieve what the illustration suggests and, indeed, how likely a further major financial crisis is which would perhaps see negative returns.

dunstonh

how likely a further major financial crisis is which would perhaps see negative returns.

Financial crisis average once every 7 years. There have been 8 since 1956. You are almost certainly going to see another one in your 10 year period. Drops on the stockmarket bigger than 10% occur frequently. I think it averages out to 1 every 2 years.

If these things concern you then drawdown is not for you. One of the biggest mistakes inexperienced investors make is to underestimate risk. Its very easy to be captivated by the positives but you dont have unlimited time on your side with a drawdown investment. Can you afford to risk it?