Drawdown puts you in control of the money in your pension. But it requires careful management as your income isn’t secure. This makes it a higher risk option than an annuity.
There’s no such thing as a typical drawdown investor. However there are common approaches to taking income. Once you’ve chosen an approach, you can choose investments to complement your strategy.
Need more information on these strategies and how it influences your investment decisions?
You have more chance of achieving your goals if your investments have similar goals to yours. By regularly reviewing your income and investments, you can check you’re on course.
There are individual fund ideas you could include as part of your portfolio, as well as multi-manager funds. Choosing a range of funds could give you a well-balanced portfolio. But if you’d rather leave this to the experts, choosing a multi-manager fund will give a balanced mix of investments within a single fund.
These ideas aren’t personal advice. You should choose investments based on your own preferences and research. Take advice if you are not sure. Please read the key information and fund factsheet, including charges, before making any decisions.
Investing for long-term growth
Drawdown investors not taking any income yet may want to choose funds that aim to provide long-term growth.
Investing for income
Those taking income generated by their investments (the natural yield) may want to choose funds that aim to pay a higher yield.
If you are drawing from capital, you may favour investments which aim to shelter against market downturns.
Keeping a cash buffer
If you’re drawing from capital, we believe you should consider holding cash to fund some future income. For example, you could choose to have at least two years’ worth of income in cash so you don’t feel rushed into selling investments.
If you’re only taking the income your investments produce you might not need to hold as much in cash, provided you’re happy for your withdrawals to reduce or even stop sometimes.
You should consider what your plans would be if your cash buffer was to run out and your investments still hadn’t recovered from a fall.
While cash can protect the value of the portfolio short term, it’s unlikely to be a good long-term strategy as it offers little growth potential.
Why variety can help reduce risk
While investment risk can't be eliminated altogether, the traditional way to reduce its effect is to use a diversified spread of investments. The impact of picking the wrong asset type, the wrong region, or the wrong sector can be reduced if a portfolio covers a range of assets, regions and sectors.
If you’re not comfortable choosing a range of funds to build a portfolio for yourself, HL Fund Manager’s Multi-Manager funds could help. Each fund is a collection of what we believe are the best funds available to achieve a particular objective, in a single, convenient investment. Because we take care of the day-to-day work of researching and managing these Multi-Manager funds, and the fee of each fund we select is included, they carry a higher charge than standard funds. Our platform charge of up to 0.45% per year also applies. View drawdown charges