Another drawdown question

Cobbler_tone

A specific request and getting my ducks in a row. I'm not looking for other options (I know how threads meander!) and have a clear pathway to meet my overall needs/desires.

£140k pot, taking £35k TFLS. A desire to take the remaining £105k as efficiently as possible, whilst remaining under the 40% band.
This will be c£20k year 1 and then slightly less each year depending on DB increases and tax band treatment.

Best products and options with lowest fees? No issue with taking it once per year if that is the most cost effective way. I think I would prefer it in fewest payments and admin, as opposed to chasing maximum growth.

What is the main difference between having a drawdown account (to take once per year) and a fixed term annuity where I could set up to take it over (for example) 6 years? I understand there is more flexibility with the drawdown route. 

Is there an obvious choice to give the balance of ease and value?

Currently it is sitting in L&G.

tacpot12

Main difference between a drawdown account and annuity is that you will be better off with one than the other! When I retired and looked at annuities, I found the rates were so low that I was going to be much better off if I took the drawdown route. Annuity rates have come up since then, but I'm pleased with how the the drawdown option is working for me, plus I get to leave my children anything that I don't use (less some IHT if the planned changes in 2027 come into force). 

The flexibility is also a factor. If you go down the drawdown route, you have the ability to change the amounts you receive more flexibly than if you have bought an annuity, where the payments are fixed from the outset.

I take my drawdown on a monthly basis using AJ Bell, and don't pay amything for these withdrawals. Their only charge is for holding shares/funds on theri platform. I pay just less than £200 a year to AJ Bell in charges or about 0.05% of my portfolio. I consider this good value. 

Taking the money monthly meant no emergency tax was charged when I had my first withdrawal, which meant I didn't have to do anything to reclaim the emergency tax.  

DE_612183

tacpot12 said:

Main difference between a drawdown account and annuity is that you will be better off with one than the other! When I retired and looked at annuities, I found the rates were so low that I was going to be much better off if I took the drawdown route. Annuity rates have come up since then, but I'm pleased with how the the drawdown option is working for me, plus I get to leave my children anything that I don't use (less some IHT if the planned changes in 2027 come into force). 

The flexibility is also a factor. If you go down the drawdown route, you have the ability to change the amounts you receive more flexibly than if you have bought an annuity, where the payments are fixed from the outset.

I take my drawdown on a monthly basis using AJ Bell, and don't pay amything for these withdrawals. Their only charge is for holding shares/funds on theri platform. I pay just less than £200 a year to AJ Bell in charges or about 0.05% of my portfolio. I consider this good value. 

Taking the money monthly meant no emergency tax was charged when I had my first withdrawal, which meant I didn't have to do anything to reclaim the emergency tax.  

With AJ Bell - do you funds still attract interest ( go up or down )?

I guess that's one of the other things is that with Annuity you are buying safety - you are protected against a global crash

tacpot12

DE_612183 said:

With AJ Bell - do you funds still attract interest ( go up or down )?
I guess that's one of the other things is that with Annuity you are buying safety - you are protected against a global crash

My investments are dividend-paying funds, so I still get the dividends. AJ Bell do pay interest on cash in the SIPP, but the rates aren't great. See: https://www.ajbell.co.uk/charges/interest-rates I get about 4.5% yield per annum on the investments and the value of my investments has increased by about 1.5% per annum on average, so I'm getting a total return of about 6% per year. (These figures are after the charges taken by the fund managers).

thingswerentthisbadinmyday

 Both of the platforms I use (for SIPP/Drawdown/ISA) do pay interest on cash balances (but the balance itself doesn’t get charged the monthly platform fee in the same way as funds and shares do).
I’d agree with a previous comment that the rates aren’t great - significantly below what I earn an (say) a top paying cash ISA.
I’ve recently decided to have a look at moving some of my cash into money market type funds but if I go that route. I have to be aware that those funds will attract the usual monthly fee. Think I need to get the abacus out!

Cobbler_tone

Or if you know the period of time you want to withdraw the pot out, a fixed term annuity? If this is set up for one annual payment at the start of the tax year will it usually be correct or need claiming back? e.g. a £20k payment each April.