The term Drawdown basically refers to the decline of an investment, commodity or fund during a specific record of period from the peak position to the trough. A drawdown is usually quoted as the percentage between the peak and the trough positions.
The term drawdown also consists of sub-divisions, one such division is Flexible Drawdown. Flexible Drawdown is a form of an income withdrawal. It is a type of plan that allows customers to withdraw as little or as much income from their pension fund as they choose and, as and when they need it.
These services will be granted to the pensioner as long as he fulfills the requirements like that of getting a minimum amount of secure pension income (£20,000) every year and has finished saving into pensions.
Once all requirements of this plan are met, then the pensioner can avail all the benefits of this plan. The tax-free lump sum can be received by the pensioner, flexible drawdown allows his income to be varied, the fund can remain invested – so it can further increase, the entire fund can all be availed at once by him and any remaining fund can be passed on, in the event of death and be availed by future generations.
However along with benefits every product or service comes with its own cons that the customer has to deal with. The cons of the flexible drawdown plan are that any ongoing income/or fund left invested is not guaranteed and could go down, the withdrawals are subject to tax and costs can be high, especially for smaller funds.
Therefore when choosing a pension plan for yourselves you should not only consider the characteristics of the plan but also consider what plan will be most financially suitable for you. Which plan fulfills you’re economic need’s.
For example flexible drawdown is not advisable for those people who carefully want to manage their money along with time but can be recommended to those who want to have a feeling of security that they have money is available in case of any crisis. Every person’s own perspective will judge the suitability of which plan to opt for.