If you are going into drawdown for the first time, your free, personalised drawdown illustration is the first step.
It will show you:
Once you request your illustration there is no obligation to proceed. We will also send you our Guide to Drawdown, explaining the benefits and risks, and we will outline next steps if you want to proceed.
Already in drawdown with Hargreaves Lansdown? If you want to convert from capped drawdown to flexible drawdown request an application pack.
Already in drawdown with another provider? Request a transfer pack »
How much income you take is entirely down to you. One way is to take only the income generated by the underlying investments, leaving the underlying capital intact to (hopefully) grow, although its value will of course fluctuate. Taking income in this way is called drawing the 'natural yield'.
As an example the natural yield for the UK stock market is currently 3.81%*. 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. 3.81% of a fund of £250,000 is £9,525.
Taking more than the natural yield from your drawdown pension might 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. Withdrawals are taxed as income. Don’t forget, you don’t have to take any income if you don’t want to: you could simply take the tax-free cash and leave the rest invested.
*Yield of FTSE All Share 3.81% in March 2016, source FT.