Pension Drawdown Examples

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Examples of pension drawdown

The sub-sections below provide a number of pension drawdown examples, using different pension pot sizes, of how much income you could potentially receive and for how long. But in order to put these into context, you will need to understand how much income you can take from a pension drawdown plan.

Read on to find out…

 

How much can I take as an income from a pension drawdown plan?

How much you can take out of your fund for income drawdown will really be dictated by what your plans are. Depending upon what you intend to do, you can:

 

  • Leave the pension fund in place beyond your normal retirement age and allow the investment fund to grow
  • Take out 25% as a tax-free cash sum from your fund and use the remaining money to provide a flexible retirement income with a flexi-access drawdown plan
  • Use a phased income drawdown approach to access segments of your pension fund to top up employment income as you ease into retirement
  • Take the entire pension fund out as one cash sum with 25% tax-free and the remaining 75% liable to income tax at your marginal rate

A pension drawdown plan does not guarantee an income for life. If this is important to you, using your pension fund to purchase an annuity which would either guarantee an income for life (Lifetime Annuity) or for a fixed number of years (Fixed Term Annuity) may be more appropriate.

 

What income could I receive from a 200k drawdown pension?

The table below shows an income drawdown example using a £200,000 pension fund, based on a retirement age of 55 with average market conditions*:

Target Income No. Of Years
£10,000 22 Years
£15,000 13 Years
£20,000 10 Years

What income could I receive from a 300k drawdown pension?

This example uses a £300,000 pension drawdown, again, based on a retirement age of 55 with average market conditions*:

Target Income No. Of Years
£15,000 22 Years
£20,000 15 Years
£25,000 12 Years

What income could I receive from a 500k drawdown pension?

The table below is another example of income drawdown using a £500,000 pension fund with retirement age, again, of 55 and average market conditions*:

Target Income No. Of Years
£20,000 30 Years
£25,000 22 Years
£30,000 17 Years

What income could I receive from a 600k pension drawdown?

This final example uses a £600k pension pot drawdown with a retirement age of 55 and average market conditions*:

Target Income No. Of Years
£25,000 29 Years
£30,000 22 Years
£35,000 18 Years

All of the above examples are purely for illustration purposes only. Pension drawdown examples can be quite complex and will differ depending upon your age and the size of your pension fund. This is why it’s very important you seek independent advice from an experienced advisor.

The advisors we work with will be able to provide pension drawdown illustrations specific to your own circumstances and income requirements. If you make an enquiry we can arrange for a specialist we work with to get in touch and discuss further with you.

 


 

Pension drawdown case study

David has reached the age of 55 and has been saving into a defined contribution pension scheme all his working life. He is married to Emma and they have 3 kids who have now all moved away from home.

David’s pension fund is worth £250,000. He currently earns £15,000 per year and wants to know, if he retires now, for how many years will his pension fund be able to produce this level of income whether he takes his 25% tax-free sum or not.

If David wants to take his tax-free sum this equates to £62,500 and would leave a pension drawdown fund of £187,500. Based on average market conditions*, his pension fund could support an income of £15,000 for 13 years.

If David opts not to take his tax-free lump sum at outset and use his entire pension fund to produce an income this amount could support his target earnings for 22 years, based on average market conditions*.

If you’d like to find out more about what pension drawdown income you could expect from your own fund, make an enquiry and we can arrange for a pension expert to provide you with an illustration.

 


 

When can I take an income drawdown from my pension?

You are allowed to use your personal pension fund for income drawdown once you have reached the minimum retirement age of 55.

You are able to use it earlier in certain circumstances such as ill health or if you’re in a profession which offers a protected retirement age (usually available for prescribed occupations such as professional sports, models or deep sea divers).

If you’d like to understand more about how pension drawdown works take a look at our comprehensive guide.

*Average market conditions

All of the pension drawdown examples shown in this article are purely for illustration purposes only and are not guaranteed amounts. Actual future investment performance may differ considerably, therefore, the income levels you receive could be higher or lower than the estimates given here.

The growth rates used are taken from simulated, historical market data and should not be assumed as a guarantee of future performance. The income amounts shown should not be considered as a recommendation or investment advice.

If you’d like to speak with a professional, independent advisor about your retirement plans or any of the information outlined here, give us a call on 0808 189 0463 or get in touch and we will arrange for a pension specialist to contact you.

 


 

Speak to a pensions expert

If you have any questions relating to any of the drawdown pension examples outlined above and want to speak to an expert regarding your own retirement fund, call us today on 0808 189 0463 or make an enquiry.

 

We can arrange a free pension review for you today

70% of customers who have a pension review find a better deal

We can arrange a free pension review for you today

70% of customers who have a pension review find a better deal

Author:
Tony has worked in a vastly diverse array of areas in the pensions industry for over 2 decades. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events. Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been "Hope for the best, but PLAN for the worst", and believes that the biggest impact that an adviser can have on a client's life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they WANT their retirement to be.

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