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Thread: does pot size affect choice of annuity or drawdown?

  1. #1

    does pot size affect choice of annuity or drawdown?

    I have a pension pot worth about 41K. Does anyone know if the size of a pot makes a difference to the choice of going with an annuity or drawdown? I had heard some years ago that with drawdown you needed a larger pot 100K+, in fact the larger the better. Is there any truth in this?

    At present I am undecided as to which way to go.

  2. #2
    You could do drawdown for approx. 200 p.a., but I can't see that it would be worth it for this size of pension pot. Without knowing you're circumstances, it's difficult to make suggestions. However, have you considered just taking all or a part of this, as a lump sum. e.g. you could take 10K p.a., where 2500 would be tax free and the remaining 7500 taxed at your marginal rate. The optimum solution would depend upon what other taxable income you have.

  3. #3
    I'll try and answer the questions without trying to give advice.

    The 100k for drawdown goes back to when drawdown was for the more wealthy types. Now just about any amount can be drawn down.

    Some annuity providers were not interested in small amounts a few years ago, this may have changed now.

    One big difference is that an annuity dies wth you or gives a small spousal pension. A draw down SIPP goes to your spouse tax free.

    This was my understanding when I went through this a couple of years ago. If anyone has more up to date info, please feel free to correct this.

  4. #4

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