If you don’t want to buy an annuity and you’d prefer to keep your pension fund invested, you can withdraw some money from your pension fund at regular intervals to live on. This option is known as unsecured pension, income drawdown or pension fund withdrawal.

To make sure you don’t use up all of your money too quickly, there are limits on the amount you can withdraw.

The advantages of this option are that you can delay buying an annuity, perhaps if the rates are less favourable, and withdraw money when you need it to live on. This option provides you with flexibility over the level of your income, but you need to be mindful that you are simply drawing down money to spend so it could run out.

While your pension fund remains invested its value will go up and down, there is also no guarantee that annuity rates will go up, they could go down.

Pros

• You can delay buying an annuity, which means you can wait to see if rates improve in the future.
• You have the flexibility to vary your income, by taking money out of your plan as and when you need it, within limits set by the Government.
• You can control where your money is invested. 
• The rest of your pension fund will remain invested in a favourable tax environment. 
• Your dependants can benefit from your pension fund when you die. This may include the option of a lump sum less 35% tax if you die before your 75th birthday.
• If you start income drawdown before age 75 you can normally take part of your pension fund as a tax-free lump sum. In order to benefit from this you don't even need to withdraw an income before your 75th birthday.

Cons

• There’s no guarantee that annuity rates will improve in the future. So you could get a lower income by waiting.
• By keeping the money from your pension fund invested it could go down in value.
• Your plan could run out of money if investments do not perform well enough to compensate for the income you withdraw.
• The costs of withdrawing an income through drawdown are higher than buying an annuity.
• From age 75 you either need to buy an annuity or continue to take pension fund withdrawals under alternatively secured pension (ASP) rules. Under ASP rules the maximum income level is lower than before age 75. In addition, unlike the rules before age 75, you must withdraw a minimum income each year.

Tax rules may change in the future.

If you are nearing 50 and considering retirement, have quite a large pension fund, and you’d prefer to keep your pension fund invested, or want greater flexibility over your income, or are just delaying buying an annuity until a later date, then income drawdown may be right for you.

You need to be comfortable with the fact that the value of your fund will fluctuate, that you could run out of money if investments do not perform, and that annuity rates could fall leaving you with a lower income in future.

As this product is not suitable for everyone, you need to get financial advice before making a decision.

If you need more help deciding whether drawdown is right for you, you could speak to your pension provider or an insurance company. You need to remember they will only be able to give information on their own products. If you want advice about the whole of the market, you’ll need to speak to an independent financial adviser.

Do your research - decide whether income drawdown is right for you by looking at all the available options for funding your retirement and considering the pros and cons of each.

Don’t forget - you can normally take up to a quarter of your pension fund completely tax-free. Tax rules may change in the future.

Remember you’re in control - you have the final decision on all the choices you make.

Consider your attitude to risk  - how do you feel about the risks involved in drawdown?