Guide · Retirement
Pension drawdown vs annuity: when can advice help?
Drawdown offers flexibility with investment risk. An annuity offers guaranteed income. Many retirement plans can use one, the other or a combination.
Drawdown
Drawdown leaves money invested and allows flexible withdrawals. The remaining pension can rise or fall, and the income is not guaranteed.
Annuity
An annuity exchanges pension capital for guaranteed income under the terms selected. This can reduce investment uncertainty but gives up some flexibility over the money used to buy it.
It does not have to be all or nothing
MoneyHelper notes that pension options can be combined. Someone may use guaranteed income for essential spending while retaining other pension money in drawdown, depending on their circumstances.
Why advice can be useful
Income needsHow much spending needs to be secure and how much can vary?
RiskHow much investment uncertainty can the household tolerate?
TaxHow should withdrawals from different sources be coordinated?
FamilyHow do spouse, beneficiary and legacy priorities affect the choice?
Sources & further reading