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Income Drawdown is the Most Popular Way to Access UK Pension Pot

More than 50% of people are likely to access retirement savings through income drawdown, according to the latest poll.

The poll asked financial advisers how their clients were receiving their income in retirement.

Income drawdown was the most popular, as 52% of advisers said clients most commonly opted for this approach as a way to access income in retirement.

22% said their clients used a combination of an annuity and drawdown, while 15% of advisers said their clients got their income from cashing in their UK Pension.

More and more clients are staying invested in drawdown during retirement and are also looking for income sustainability balanced against greater flexibility. This has led advisers to focus on developing sustainable withdrawal strategies which minimise risk, to ensure their clients do not run out of money their retirement.

Drawdown provides an effective inheritance tax tool, as it provides the ability for the remaining UK pension funds to be passed down to a nominated beneficiary on death, where if the deceased was under age 75, the inheritor will receive the fund tax free.

With poor annuity rates, clients will be looking for ways to obtain a better retirement income, and drawdown is the mechanism for doing this.

The real test for flexi-access drawdown will be during a sustained downturn in investment markets when some people, with hindsight, might wish they had opted for the certainty of an annuity.

Only 11% of advisers said their clients access their retirement income through buying an annuity alone.

The poll result shows that there is still a place for a traditional annuity, with a proportion of clients looking for certainty.

The rules were amended in 2015 when the former chancellor George Osborne announced pensioners would no longer be required to purchase an annuity at retirement.

Clients were using other options to access retirement income. This could come from selling less tax efficient investments, eg buy-to-let property, shares and funds held in general investment accounts, or making withdrawals from their offshore bonds or Isas, and perhaps a regular phased withdrawal of the tax-free cash from their pension.

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