Income Drawdown
“Flexible Retirement Income While Keeping Your Funds Invested”
An Income Drawdown is a retirement income option that allows retirees to access a regular income from their retirement savings while keeping the remaining funds invested. Unlike an annuity, where your pension fund is exchanged for a guaranteed income, income drawdown gives you greater flexibility and the potential for continued investment growth.
This option is ideal for retirees who want control over their retirement savings and are comfortable with investment risk.
How Income Drawdown Works
- You retire and transfer your retirement benefits into an approved Income Drawdown Plan.
- Your retirement funds remain invested in a professionally managed portfolio.
- You choose how much income to withdraw within the limits prescribed by regulations.
- The balance of your fund continues to earn returns based on investment performance.
- Any remaining balance can be passed on to your beneficiaries upon death.
Income Drawdown
Who These Plans are For
Income Drawdown may be suitable if you:
- Want flexibility in how you receive your retirement income.
- Have other sources of income and can tolerate market fluctuations.
- Wish to preserve wealth for your beneficiaries.
- Are looking for the potential of higher long-term returns compared to a guaranteed annuity.
Benefits and Considerations
01.
Key Benefits
- Flexibility to adjust your retirement income based on your needs.
- Potential for continued growth of your retirement savings.
- Ability to leave any remaining funds to your beneficiaries.
- Access to professional fund management.
- Greater control over your retirement assets.
02.
Things to Consider
- Your income is not guaranteed and depends on the value and performance of your investments.
- Excessive withdrawals may reduce the longevity of your retirement fund.
- Investment returns may fluctuate depending on market conditions.
Our Retirement Planning Support
We help retirees evaluate whether an Income Drawdown Plan, an Annuity, or a combination of both is best suited to their retirement goals. At AIVA, we will guide you through the available options, projected income levels, investment strategies, and beneficiary planning to help you make an informed decision.
Regular reviews are important to ensure your withdrawals remain sustainable.
Frequently Asked Questions
What is an Income Drawdown Plan?
An Income Drawdown Plan is a retirement income option that allows you to receive regular income from your retirement savings while keeping the remaining funds invested. Your income is drawn directly from your retirement fund rather than being guaranteed by an insurance company.
How is Income Drawdown different from an annuity?
An annuity provides a guaranteed income for life, while an Income Drawdown Plan offers flexible income withdrawals and keeps your retirement funds invested. With income drawdown, your income and fund value may fluctuate depending on investment performance.
Who is eligible for an Income Drawdown Plan?
Generally, retirees who have accumulated retirement benefits in a pension or provident fund and wish to maintain investment exposure after retirement may be eligible.
How much income can I withdraw?
The amount you can withdraw is subject to the limits set by the Retirement Benefits Authority (RBA) and the terms of the retirement provider. At AIVA, we can help you determine a sustainable withdrawal rate.
Is my income guaranteed?
No. Unlike an annuity, income drawdown payments are not guaranteed. The amount available depends on the performance of the underlying investments and the level of withdrawals made.
What happens to my money after retirement?
Your retirement savings remain invested in a professionally managed portfolio. Any growth or decline in the value of your investments will affect the value of your drawdown fund.
What are the risks of Income Drawdown?
Key risks include:
- Investment risk
- Longevity risk – i.e the risk of outliving your savings
- Inflation risk
- Withdrawal risk -i.e drawing too much too early
Can I change the amount I withdraw?
Yes. Most Income Drawdown Plans allow you to review and adjust your withdrawal amount periodically, subject to regulatory requirements and provider guidelines.
What happens if my investments perform poorly?
Poor investment performance may reduce the value of your retirement fund and affect the sustainability of your future income. Regular reviews and prudent withdrawal levels can help manage this risk.
Can I leave money to my beneficiaries?
Yes. One of the key advantages of Income Drawdown is that any remaining balance in your retirement account can be paid to your nominated beneficiaries upon your death.
How often can I receive payments?
Income can typically be paid monthly, quarterly, semi-annually, or annually, depending on your preference and the provider’s options.
Can I switch from Income Drawdown to an annuity?
In many cases, yes. Depending on the provider and regulations, you may use your remaining drawdown balance to purchase an annuity at a later stage.
Is Income Drawdown suitable for everyone?
Not necessarily. Income Drawdown is generally best suited for retirees who are comfortable with investment risk, desire flexibility, and want the potential to leave an inheritance. Those seeking certainty and guaranteed income may find an annuity more suitable.