What is ‘natural yield’?
One way of taking income from drawdown is to take only the income generated by the underlying investments, leaving the underlying capital intact to hopefully grow, although its value could fall as well. Taking income in this way is called drawing the 'natural yield'. As an example the natural yield for the UK stock market over the next twelve months is expected to be 3.69%*. This yield is historic and will vary in future; it is not guaranteed. It is provided to help you make your own decisions on what income to take, but you need to also factor in your attitude to risk and the nature of the investments you have chosen.
Taking more than the natural yield from your drawdown pension will mean selling investments and withdrawing from capital, which increases the risk of you running out of money later on in retirement which could seriously impact your lifestyle.
*Annual yield of FTSE All Share 3.69% 27 December 2017, source Bloomberg Consensus Overview.