Quote Originally Posted by Taunton Blue Genie View Post
I read everywhere that annuities are a very poor option for one's pension pot(s) but as someone without any dependants or progeny is there a more balanced option than drawdown (which could either denude my fund unduly if I live too long or leave too much unspent money in the bank if I peg it too early) and an annuity?

I have sought professional financial advice in the past regarding all sorts of investments but it has usually ended in tears. Just wondered if there are any options beyond the two extremes (other than doing a split between the two).
Hi Taunton.

I’m an IFA and most of my work is around retirement planning.

Drawdown tends to be the most popular and the route I recommend as being suitable for lots. However it depends on your attitude to risk, and perhaps more importantly, how much you can withstand any short term fluctuations without panicking.

We’ve had 10 -12 years of really great investment performance and many investors haven’t seen any really bad years. This means that many people already in drawdown will have unusually blinkered views on how great it is (in the same way that you may have a blinkered view of how bad investments tend to be!).

To answer your question; Yes. There are some products from a couple of pension providers that are specifically designed to give some of the flexibility of drawdown, with some certainty of income that you’d get from an annuity.

However these can have slightly higher charges.

In my experience I find that really explaining the investments risks (understanding that a £100,000 fund can drop to £80,000 by next year - and knows that this is very possible and should not panic), along with a properly constructed drawdown portfolio.

Many people have the same investment strategy for
drawdown than they use to build their fund as it’s an easy option. This is lazy planning and will lead to tears when we have the next crash. I would strongly consider setting the pension up along the lines of having the next 2-4 years of income being invested in cash / really low risk investments, and the next few years income invested in some good low-medium risk, with any money that’s unlikely to be needed until later in life can be held in things which will fluctuate more. This is often a better option - and should be rebalanced every year. Some drawdown investment portfolios I see are shocking - they are great in the good times, but the income comes straight from cashing in the investments every month - when things drop this means that the pension is forced to sell on a low and it will never recover!

Hope this helps!