What’s the right drawdown for me?

When it comes to thinking about your retirement income, make sure you focus on asking the right questions, says Justin King.

Two small figures sat on a pile of money

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I specialise in providing advice to people who are nearing retirement. This is a confusing time for people approaching the longest holiday of their lives. Pensions seemed to be in a continual state of flux. Do we defer? Do we purchase an annuity? Do we move into income drawdown and accept the fate of the markets to deliver our retirement income? Who will live the longer, the husband or the wife?

Maybe the first question should be “what will it cost me for you to help me make the right choices for mine and my families’ future?”

What do you want to achieve?

What a conundrum! The internet can provide huge swathes of information which can end up confusing more than simplifying. Information is a wonderful thing and Google allows the prospective retiree more opportunity to educate himself on the options available than ever before. But what it doesn’t understand is individual requirements based on a real understanding and knowledge of what the prospective retiree wants to achieve and do to be fulfilled in their retirement.

What plans do you have for your retirement?

I spoke to a new prospective client yesterday. He was a 65-year-old teacher who had taken his teachers’ pension and then returned to work in non-pensionable employment. He had £100,000 saved in a freestanding AVC scheme (additional voluntary contributions scheme). He wanted to enter into a drawdown plan and wanted to know what the cost would be. After a few exploratory questions it was clear that this gentleman had undertaken or was undertaking substantial research and was very keen to find out what the costs would be for me to provide him with the service. I asked him: “why would you like to access this pension at this time, what are you going to do with the money and what plans do you have for your retirement?”

He replied that he wasn’t actually sure but had already concluded that he didn’t want to buy an annuity at this time. I put forward an idea: you could leave it where it is, not incur any transfer charges or advice fees and leave the whole fund available in the event of his death for your wife who didn’t have as much pension provision as he did?

‘I hadn’t thought of that’

There was silence on the end of the telephone. “I hadn’t thought of that,” he said. I replied that it may not be the answer, but illustrated that his starting point for his research should not have been “which drawdown plan is right to me?” but what are the best choices for my future financial happiness. The key word in personal finance is “personal”. Everybody’s story is different. However the marketers try to pigeonhole us into subsets and ABCs.

In my experience everybody has their own hopes and dreams for themselves and their families and the relationships within them are as unique as their own DNA. Google can provide a mass of information which can inform and educate, but only an experienced financial planning professional can listen and understand the problems and choices being faced by the prospective retiree and empower them to make the best choices for their futures.

Maybe the first question should be “what will it cost me for you to help me make the right choices for mine and my families’ future?”

>>>Read the unbiased.co.uk at-retirement guide