Can I Use Pension Drawdown Without Advice?

Is Pension Drawdown Available With No Advice?

Again, it is possible to access pension drawdown with no advice providing you have a defined contribution pension. This said, doing so could prove to be an expensive mistake if you’re not sure what you’re doing and aren’t sure how to invest your pension.

When you choose pension drawdown, there’ll be a lot to consider. This is where many people find the expertise of an adviser useful. Decisions you’ll have to make include where you’ll invest your fund, which might be in asset classes such as:

• Cash
• Corporate bonds and gilts
• Commercial property
• Equities

You also generally have the option to use unit trusts or investment trusts, which offer access to a whole array of shares, bonds or both via one single investment (i.e. in the trust).

Unit trusts and investment trusts generally specialise in certain geographic areas (e.g. the US, the UK, emerging markets, Asia etc.), so you could find yourself needing to brush up on your knowledge of global investment markets to see if they’re appropriate for your retirement fund.

How Much Pension Income Should I Take?

As mentioned, your pension pot in drawdown is a finite amount, so it could run out if you take too much out and don’t take into account longevity risk.

Another aspect to think about is whether you want to take your 25% tax-free cash entitlement upfront or gradually drip feed your pension into drawdown over time. This may impact how much tax you pay on your drawdown pension.

Gradual or phased income drawdown lets you take the 25% tax-free cash component in smaller tranches and can be more tax-efficient, but this depends on your circumstances. An adviser can discuss the ins and outs of the pension tax rules with you to ensure you’re drawing down your pension in the most tax-efficient way possible for you.

Income drawdown sees you take on all the investment risk yourself, so for most people it makes sense to use a financial adviser such as those on the team at Drewberry to manage your pension pot.

John Spink
Head of Financial Planning at Drewberry

An expert pension adviser is best-placed to put together a drawdown program that may help reduce the risk of your pension running out early. However, for a rough idea of how long your pension pot will last, the below Pension Drawdown Calculator can help.

Is Pension Drawdown Advice Worth It?

Flexi-access drawdown has only been available since 2015; before this, not everyone could access their pension with full flexibility. That means that there’s much in the way of statistics regarding how advised vs. non-advised pension drawdown funds have performed over time.

However, there’s a lot of evidence that financial advice in general can have a significant positive impact on wealth. Studies have indicated that people who take financial advice can be around 50% richer than those who don’t.

Often, the expertise of an adviser can help you steer clear of what’s known as ‘pound cost ravaging’.

This can happen if you take out too much money from your pension early on and then the markets experience a downturn, cutting the value of your remaining investments. Due to the sizeable withdrawals you’ve already made, there may not be enough funds left in your pension pot to rebuild after this loss and you could face a leaner retirement.

Over time, good financial advice should in theory more than pay for itself by hopefully providing improved investment performance and potentially preventing unwanted losses. What’s more, with someone else making the hard decisions, it could also help you sleep at night!

Jonathan Cooper
Head of Paraplanning at Drewberry

Your Financial Plan: Build A Better Future

A good financial plan can help you make the right decisions when it comes to your finances. Make the right decisions today to build a more prosperous future.

Good financial planning with clear goals can increase your retirement income by as much as 53%. Old Mutual Redefining Retirement Survey

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as planning our finances. Below are just a few reasons why it makes sense to let us help.

• See your financial future
  We use sophisticated financial modelling technology to visually show you your financial future. A living financial plan where you can clearly see what you can achieve depending on the decisions you make – read more
• Achieve the retirement you deserve
  Can afford that dream round-the-world trip? Can you help your children onto the property ladder? We’ll model your goals and build your financial plan to help you achieve them.
• Our expertise saves you time and provides peace of mind
  Organising your pensions, investing your assets, managing risk and making the most of your tax allowances is all taken care of as part of your financial plan.
• We’ve got bargaining power on our side
  This allows us to negotiate better rates for you than dealing with providers yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 2386 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the decisions we help you make. Doing it yourself or going direct to a provider won’t provide this protection, so you won’t benefit from these securities.