Guide to Drawdown. A flexible way to access your pension: this guide explains the benefits and risks of drawdown

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1 NEW PENSION FREEDOMS HAVE ARRIVED Guide to Drawdown A flexible way to access your pension: this guide explains the benefits and risks of drawdown What s inside: How drawdown works The advantages and disadvantages Why it is more flexible than an annuity What could go wrong? Investment strategies you might consider One College Square South, Anchor Road, Bristol, BS1 5HL

2 Drawdown an introduction Contents 3 What is drawdown? 4 How does drawdown work? 7 Pension contributions 8 What happens when you die in drawdown? 10 Weighing up the options 13 What could go wrong? 14 Case study 16 Could drawdown be for you? 17 Drawdown investment strategies 20 Why choose Hargreaves Lansdown? 21 Client experience 22 Important investment & technical notes This guide explains drawdown and its benefits and risks. It is designed to give you the information you need to help you make your own financial decisions, but if you are at all unsure about what to do you should seek personal advice. Thanks to new pension rules, investors have the freedom to take as much as they like from their pension at retirement. The main way of taking this as a regular income is known as drawdown. Drawdown is one of the most flexible retirement options available but this does make it a more complex and higher risk option. Instead of exchanging your pension for a secure income for life (an annuity) or taking lump sums (an uncrystallised funds pension lump sum), drawdown allows you to draw a variable income directly from your pension fund, through a Self Invested Personal Pension (SIPP). It offers the potential for growth and a chance to protect income from inflation, as well as an opportunity to pass your pension fund on when you die (tax free in some circumstances). For many, this control and flexibility gives drawdown its appeal, but it comes at a price. There is more which could go wrong, as we show on page 13. In this guide, where we mention an annuity, we mean a secure lifetime annuity. It is possible to buy other kinds of annuities paid for a short term, or which depend on the performance of an underlying investment fund, but the overall income is not guaranteed. None of this drawdown guide may be reproduced without permission. Issued by Hargreaves Lansdown Asset Management Ltd, 1 College Square South, Bristol, BS1 5HL 2

3 What is drawdown? In drawdown, you take a retirement income directly from your pension fund, which remains invested. You choose what income to take. You can stay in drawdown for as long as you like, or at any time you can use your fund to buy an annuity. The aim is to keep your options open and increase your income through investment growth. However, if investments don t go the way you want, or if the pension pot is depleted by excessive income withdrawals, your income will be reduced. The risk and responsibility rests with you; bear in mind if you buy an annuity the insurance company carries all the risk. If you die whilst in drawdown, there is more flexibility than if you had purchased an annuity. The remaining fund can provide a lump sum or an income for your beneficiaries (see page 8 for more details). However, unlike an annuity, if you live longer than expected you could run out of money, which could have a significant impact on your lifestyle. TAX-FREE CASH AND A TAXABLE INCOME Up to 25% tax-free cash From age 55, when you re ready to start drawing your pension, you can normally take up to a quarter of it tax free, and use the rest to provide a taxable income. Tax-free cash Remaining funds Income Remaining funds are in the drawdown account In drawdown you take income directly from the fund. The fund could rise or fall in future, potentially leaving you short of money later on. Regular income - under new pension freedom rules you can choose how much income to take. There are no maximum or minimum income limits. 3

4 How does drawdown work? There is no minimum withdrawal amount for drawdown, so you could simply take your tax-free cash and leave your remaining funds invested until you require an income. When you do decide to draw an income you can choose how much to take out. There is now no limit to the amount of income you can withdraw. Those who invested in capped drawdown before 6 April 2015 can choose to keep their income subject to the cap, or convert to drawdown under new pension rules. You can find out more about capped drawdown on page 6. Can you vary the income? Yes. You can alter the income you take as you go along, and choose when you take it. You can also stop it and start it as you wish. This might be useful if you wanted to stay within certain tax allowances in a given tax year, or if you have particular expenses to cover (such as a holiday or paying for a wedding). How are withdrawals taxed? After taking your 25% tax-free cash, your withdrawals will be subject to Income Tax. Your drawdown provider will deduct this from your withdrawals. The income you take from your drawdown plan will be added to any other income received in that tax year. This is worth noting if you plan to take large withdrawals, as you could be pushed into a higher tax bracket as a result, you could even end up as an additional-rate (45%) taxpayer. When you first take taxable income from a pension, it is likely that tax will be deducted using an emergency tax code, unless your pension provider has received a current original P45. The emergency tax code will continue unless HMRC confirms a different tax code should be used. Paying emergency tax makes it more likely that tax could be over-paid: you may need to reclaim this directly from HMRC. 4

5 Mix and match When deciding how to access your pension benefits you are not limited to one option you can choose a mixture. For example, part of your pension can be used to buy a secure income (an annuity) to cover your essential living costs. The remainder, with which you might potentially afford to take more risk, could then be placed into drawdown to provide a flexible income to supplement your secure income. GETTING STARTED IN DRAWDOWN STEP ONE: You decide how much of your pension you want to move into drawdown. You don t have to do it all in one go. It is possible to phase the process, which can be tax efficient. Alternative option You can now take lump sums directly from your pension without moving into drawdown. These are known as uncrystallised funds pension lump sums (UFPLSs). 25% of the lump sum is tax free and the remainder is taxed as income. If you would like more information on this option, please contact us. STEP TWO: You decide how much tax-free cash you would like to take. Most people can take up to 25% of the fund they move into drawdown. This tax-free cash must either be taken at this point or not at all. Importance of regular monitoring If you are considering drawdown or an UFPLS you will need to check your SIPP investments are performing the way you want, and that your retirement plans are on track. Remember, poor investment choice and performance coupled with excessive income withdrawals can quickly reduce the value of your pension, and subsequent income. Reviewing and monitoring your investments on a regular basis is essential. STEP THREE: Decide if you would like to withdraw an income, and how much you wish to take. 5

6 Drawdown under old pension rules What rules used to apply to drawdown (and why some people will choose to keep them) Drawdown under the old rules (capped drawdown) works in exactly the same way as drawdown now, except the income which an investor can take is limited (dependent on age and government limits). This is called the GAD (Government Actuary s Department) limit. The GAD limit is intended to be roughly equivalent to 150% of the annual income an investor could receive from a basic annuity using the same value of pension. The GAD limit is reviewed at least every three years, and then annually after age 75. Capped drawdown is no longer available to new investors. However, those already in capped drawdown can continue to withdraw an income within their GAD limit (which will continue to be reviewed as above) or they can choose to convert to drawdown under the new pension rules and remove this limit. 6

7 Pension contributions You can continue to make pension contributions once drawdown has commenced. If you are under 75 you will also receive tax relief on personal contributions subject to your lifetime and annual contribution allowances. Annual Allowance Pension contributions are subject to a 40,000 annual allowance. This applies to any benefits you are building up in defined benefit (e.g. final salary) or money purchase (e.g. personal, self-invested) pensions. Within the standard annual allowance there is a Money Purchase Annual Allowance (MPAA) of 10,000. Lifetime Allowance The limit on the total value of benefits you can take from all your pension schemes is called the lifetime allowance currently 1.25 million (dropping to 1 million in 2016/17). Remember if you have registered for pension protection against the lifetime allowance tax charge (payable should you exceed this limit), and choose to make additional contributions, your protection could be lost. If you would like more information on the lifetime allowance please contact us for a copy of our factsheet. Tax rules can change and any benefits will depend on your individual circumstances. The MPAA will be triggered once pension benefits are first flexibly accessed, for example taking an income from a drawdown plan set up under, or converted to, the new pension rules. Just taking tax- free cash will not trigger the MPAA. Those in capped drawdown who remain within their capped income limits and choose not to convert to drawdown under the new pension rules, will not be subject to the Money Purchase Annual Allowance provided they do not flexibly access any other pension benefits in another way. 7

8 What happens when you die in drawdown? The scheme trustees have discretion over who receives the death benefits from drawdown, however they must take your wishes into account along with any other relevant information. Benefits are usually paid outside of the Estate and are thus not normally subject to Inheritance Tax. More than one beneficiary can inherit the pension. There are various options for passing the fund to your beneficiaries, some of which may be tax free (see table below). You can change your beneficiaries at any time, a flexibility which allows you to plan ahead as well as to accommodate any change in your circumstances. The nomination is not legally binding, however it does alert us to your wishes. The case study on page 9 shows how a pension could be passed on throughout family generations. It shows how it is possible for a spouse, children and grandchildren to inherit pension wealth. The flexible death benefits of drawdown may be an important consideration if you plan to pass on your pension when you die. In the Vantage SIPP you can nominate to whom you would like the remaining pension paid (and can nominate more than one person), via our simple expression of wish form. If you have pre-retirement funds, or are in drawdown How can your pension be passed on? If you die before age 75 If you die on or after age 75 Lump sum Tax free Taxed as income* Income Tax free via an annuity or drawdown (both options available to any dependants or nominated beneficiary) Taxed as income* via an annuity or drawdown (both options available to any dependant or nominated beneficiary) *Income is taxed at the beneficiary s rate of income tax. 8

9 New rules mean pension wealth can now be passed on WHO MIGHT BE IN YOUR PENSION FAMILY TREE? Husband dies age 74 with 500,000 in his drawdown account. 500,000 passes tax free to wife Two children inherit half each, which they both decide to keep within a SIPP, so there is no tax to pay on the investment growth. Withdrawals are subject to income tax as the mother died after age 75. Both children die after age ,000 passes tax free to their two children Remainder passes tax free to grandchildren Wife inherits the pension and continues with drawdown. Withdrawals are tax free as husband died under age 75. Leaves 400,000 to pass on when she dies age 85. Grandchildren inherit the pension with the same options as their parents. Withdrawals are subject to income tax. Tax rules are subject to change and benefits will depend on circumstances. New rules now make it possible to pass your pensions on to your beneficiaries in a tax-efficient manner. To put this into context, previously lump sums inherited from drawdown were subject to a 55% tax charge. 9

10 Weighing up the options Deciding how to take benefits from your pension is a major decision. It is important you fully understand the options before deciding which works best for you. Don t forget you can select a mix and match approach to suit your needs. Lifetime annuity Drawdown UFPLS Consider this option if you need some form of secure income and accept that once set up the income cannot be changed. This is one of the few ways of providing a guaranteed income for life.... you want to keep the pension invested and draw a variable income from it. You must be comfortable that the pension is invested which means future income is not secure and could fall, or even run out.... you want to withdraw a lump sum directly from the pension, and have not yet taken any tax-free cash or income from that part of the fund. You must be comfortable that the remaining pension is invested which means future income is not secure and could fall, or even run out. Is income secure, for life? Yes No No Can I take part of the fund tax free? Yes usually up to 25% of the fund you are using can be paid as a tax-free lump sum. Yes usually up to 25% of the fund you are using can be paid as a tax-free lump sum. Yes usually 25% of the lump sum you take will be tax free. How do I take the rest? Do I have to use my entire pension fund? Do you retain control over the pension and so need to review regularly? You convert it into a secure income for life. Once the annuity is set up, the income is paid for life. No you can choose how much you use to buy an annuity. You can leave the remaining drawdown funds invested and take what income you like when you like. There is no minimum or maximum withdrawal limit. No you can move funds into drawdown in stages, known as partial or phased drawdown. No Yes Yes You will be paid your lump sum in one go. 25% of this will be tax free and the rest taxable. If you have reached 75 and used up most of your lifetime allowance the tax-free amount could be less than 25%. No you can take lump sums as and when you require income. Do you need to decide on the death benefits at the start? Yes No you can keep your options open. No you can keep your options open. 10

11 What else is there to consider? Annuities are dependable but inflexible An annuity is simple. You exchange your pension fund for a secure lifetime income from an insurance company. Unlike drawdown, you do not need to worry about investment decisions or running out of money: the insurance company shoulders all the risk. This lifts a huge burden but it takes away your control, and you lose some flexibility. Annuity options need to be chosen at the start. Once set up, you cannot normally change the annuity; equally the insurance company can t reduce the income they ve promised you. Although your income is guaranteed for life, unless you have chosen additional death benefits the annuity will stop when you die. These additional death benefits cannot be changed and may be lost if your spouse dies first or you divorce. Drawdown and UFPLSs, on the other hand, do not require any one-off decisions. This may appeal if you d like to cater for changing personal circumstances over a retirement lasting 20 years or more. The danger of inflation It s worth considering how inflation could affect your retirement inflation at 5% could halve the buying power of your income in 15 years. You can choose an annuity which will increase with inflation or by a set percentage each year. A level annuity offers no protection from inflation. Both drawdown and taking periodic UFPLSs, give you the potential to increase your fund value and income which can provide inflation-proofing protection. However this depends on you making the right investment decisions. If you take too much income or your investments perform badly you could also run into difficulty. Consider on-going costs When you buy an annuity any set up costs and on-going charges are included in the annuity income you receive. You will simply receive your income when it is due, with nothing more to pay. Keeping funds invested for UFPLSs or drawdown is different. Charges for on-going administration and investment management will be deducted from your SIPP account (a reason low charges are important) and you will need extra fund growth to make up for them. It is important to shop around to get the best deal. Tax implications It may be enticing to take large withdrawals or perhaps even your whole pension as cash. However you should carefully consider the 11

12 tax implications. Taking your pension all in one go could mean 75% of it is subject to income tax. You may decide that taking a regular income is more tax efficient. Beware of investment scams New pension rules make investment scams more likely. However money is drawn from a pension, you should be careful where you re-invest it. Investment scams exist. These scams tend to be carried out by firms which are not regulated and warning signs include cold calling or texting, the promise of unique or unusual opportunities offering quick, easy profits or something which seems too good to be true. You can find out more at scamsmart.fca.org.uk Consider the impact of taking your pension on means tested benefits Withdrawing money from your pension may reduce any means tested benefits you receive. Withdrawals from your pension may count towards capital or income for the assessment of any means tested benefits. Once you have reached pension credit age (female State Pension age) a notional pension income may be taken into account. You can find more details about means tested benefits at Consider the impact of taking your pension if you are in debt Creditors are more likely to be able to call on any money you withdraw from your pension. Any money held in a pension may be protected from your creditors if you are in debt and they take action against you. Once you take it out any protection could be lost. Once you are 55 an undrawn pension might be taken into account in bankruptcy proceedings. Do you plan to make future contributions to pensions? If you intend on making large pension contributions in future, bear in mind that by starting to access your pensions flexibly (for example via income from drawdown or as an UFPLS) you could restrict future contributions to SIPPs and other money purchase schemes to 10,000 a year. 12

13 What could go wrong? Biggest risk: Your fund could be significantly (if not completely) eroded in adverse market conditions, if you make poor investment decisions or if you make high income withdrawals. Worst outcome: You have little or nothing to provide income or an annuity for you or your beneficiaries later in retirement. If your pension will be your main source of retirement income, you need to take far more care when making your decision to go into drawdown than if you have other income to fall back on. You should seriously consider whether a secure lifetime income (an annuity) would be more appropriate. If you are in any doubt whatsoever you should seek professional financial advice. If you lose money in retirement it is extremely difficult, if not impossible, to get it back again as your sources of income may be limited and a return to work might not be an option. You are compounding any losses by taking income from the fund. Ultimately, you could run out of money. If you go into drawdown but intend to buy an annuity later, there is the risk that annuity rates may have fallen by that point. Lower annuity rates, and a smaller pension fund, could reduce your future income dramatically. It is possible an annuity purchased on day one could provide a greater total income over your lifetime. Investment common sense You are responsible for your decisions and the outcome they generate. Your fund will have to work hard to keep up with income withdrawals, charges and inflation. This means anyone considering drawdown needs to be comfortable with the risks of stock market investing, and happy to accept the ongoing costs and regular monitoring which drawdown requires. Lower-risk investments may struggle to keep pace with the income you withdraw, while higher risk investments could mean the capital will be subject to large fluctuations. In the worst case scenario the value of your pension could fall dramatically, leaving little or nothing to provide an income or annuity for you or your dependants. As an extreme example, your fund could be entirely invested in the shares of a single company, which then goes into liquidation, losing everything. By adopting a sensible investment strategy and ensuring withdrawals are sustainable, you can mitigate the risks you face, but they won t go away completely. Take a look at our case study on page

14 Drawdown case study The following example is fictitious, but possible. It is designed to highlight one of the risks of drawdown, and closely follows the performance of the FTSE 100 Index from January 2000 to January 2010 (shown in the inset opposite). Of course, get it right and there is the potential for increasing the income and the fund value over time, but the important point is there are no guarantees. Scenario: A healthy non-smoking man takes his tax-free cash and goes into drawdown on his 65th birthday. He has 250,000 invested. Each year, he chooses to draw an income equivalent to the annuity his remaining drawdown fund could buy at that point. In the first three years his fund value falls by over 50%. It then makes a modest recovery, before falling again, but by then the damage has been done. On day one, the annuity income available is 14,947, paid for life. At the end of ten years, the annuity his fund could buy is just 8,196 per annum. Summary: High withdrawals are not sustainable in drawdown and are made worse by poor investment performance. If this client had decided to take the full 14,947 each year, his fund value (on which he relies for a lifetime income) would have diminished by almost 80% to 53,331 in the first 10 years. High withdrawals will significantly impair the ability of the portfolio to recover from the market s inevitable falls. The annuity incomes quoted are for a healthy non-smoker, paying a level income with no death benefits, annually in arrears. The chart assumes annuity rates as at March 2015 for his age and fund value at that point: in reality annuity rates fluctuate and could go up and down in future. Annuity options can be adjusted to meet your requirements: please contact us for your quote. 14

15 Start DRAWDOWN: THE RISKS (PLEASE SEE THE CASE STUDY EXPLANATION ON PAGE 14) Fund value Income 250,000 25, , ,000 This case study is based on this market scenario, which closely follows the FTSE100 from January 2000 to January 2010: 20, , ,000 15, , ,000 10,000 75,000 50,000 25,000 The remaining fund value at the end of 10 years is 102,575. If he used this fund to buy a lifetime annuity at age 75 he might receive around 8,196 per annum. 5, Year 1 end Year 2 end Year 3 end Year 4 end Year 7 end Year 6 end Year 5 end Year 9 end Year 8 end Year 10 end Remaining fund Remaining value if fund he stays value in if drawdown he stays in income drawdown Annuity income he could buy on day one Annuity income he could buy on day one Variable drawdown income (set at the annuity income his fund value could buy at this point) Variable drawdown income (set at the annuity income his fund value could buy at this point) 15

16 Could drawdown be for you? This is a high risk option If you have any doubts we strongly urge you to seek personal advice. Deciding its suitability is not simple and will depend on your circumstances. Below are some reasons it might appeal: You are happy to make your own investment decisions and are comfortable with stock market investments. You have other sources of income in retirement so can accept some income fluctuations. You would like an income which has the potential to increase and maintain its value in line with inflation, although this is by no means guaranteed. You are happy to accept the on-going costs, regular reviews and administration which drawdown entails. You would like to maintain control and flexibility over your pension pot, including what happens when you die. Most importantly, you accept your income could fall significantly as well as rise. ANY QUESTIONS? CALL US ON (Mon-Thurs 8am-7pm Fri 8am-6pm Sat 9.30am-12.30pm) 24 hour access to your investments via the HL Vantage service - available online, by phone or by post, or on your smartphone or tablet with our free app for the iphone, Android TM and ipad. iphone and ipad are trademarks of Apple Inc. Android is a trademark of Google Inc. 16

17 Drawdown investment strategies While investment risk can t be eliminated, you can mitigate it to a degree with a diversified spread of investments. This has been made even more important now there are no limits on income withdrawals. The impact of picking the wrong asset type, the wrong region, or the wrong sector is reduced if a portfolio covers a range of assets, regions and sectors. A balance of investments may be considered boring and pedestrian by some, but it potentially reduces the risk of making a wrong move. Some investment funds spread risk across several asset classes, sectors and geographical areas and, within those, across dozens of different investments. It is important to try and get a spread across different managers in case a particular fund manager s performance goes off the boil. Investing solely in cash isn t risk free either, particularly when interest rates are low or inflation is high. Inflation will erode the real value of cash and you risk depleting the fund if you take income at a faster rate than the fund can grow. Cash is unlikely to be a suitable long-term investment for drawdown. Consider a well-diversified portfolio of asset classes such as: Cash to pay out income and for a cash buffer. Fixed interest (corporate and government bonds either directly or in funds) to generate income and provide diversification from other higher risk investments. Equities (either directly in shares, or via investment funds) potential for higher long-term returns through capital growth and dividend income. Other factors which may affect your investment choice: Your goals Your other sources of income Your attitude to investment risk On the following pages there are a few common scenarios in drawdown and possible investment strategies for each. Please note these strategies are not personal advice. The aim is to get you thinking about your own investment approach. Whatever strategy you choose it s a good rule of thumb to hold at least a year s retirement income in cash to avoid having to sell investments when the market is down. For more investment ideas why not take a look at our website INVESTMENT SCENARIOS OVERLEAF TAKING A REGULAR INCOME TAKING OCCASIONAL WITHDRAWALS NOT TAKING AN IMMEDIATE INCOME TAKING HIGH WITHDRAWALS 17

18 SCENARIO 1: TAKING A REGULAR INCOME Key point: The performance of your investments needs to match your regular withdrawals. Investing purely in cash is unlikely to be a suitable way to produce the level of returns required to sustain withdrawals. If you take too much risk and the market falls significantly your fund value (and future income) will reduce, especially if you take withdrawals after the market has fallen. Investment strategies to consider: Withdraw the natural yield income generated by the underlying investments (typically via dividends or income from bonds). This allows you to take an income from your pension whilst leaving the underlying capital intact. Investors could consider bonds and high dividend-paying shares. For example, corporate bonds could reduce a portfolio s volatility, while equity income funds can offer potential for a rising income and capital growth over the long-term. Should markets fall, you could still receive income whilst you wait for the capital to recover. However, remember the income generated will vary and both the income and capital could fall. SCENARIO 2: TAKING OCCASIONAL WITHDRAWALS Key point: Making sure your one-off withdrawals can be funded without having a negative effect on your investment performance. If you invest solely in higher risk investments, which can be more volatile, you risk having to sell your investments at precisely the wrong time, for example following a fall in the market. This would further erode your pension pot. Investment strategies to consider: Maintain a cash buffer If you re looking to take one-off withdrawals from your drawdown fund to cover unexpected expenses you should consider having a significant emergency cash buffer. Income focused investments You could consider investing part of your portfolio in corporate bonds and equity income funds. Rather than re-investing the income you could leave it to accumulate in your drawdown account to build up a cash buffer. This accumulated income could then be used to fund oneoff withdrawals, avoiding the need to make ill-timed investment sales. Capital drawdown considering total return, not just income. For some investors the natural yield doesn t provide enough income so some capital withdrawals are necessary. There are inherent risks your fund growth will have to keep pace with your withdrawals or the value of your pension will fall, reducing the level of income you can take. 18

19 SCENARIO 3: NOT TAKING AN IMMEDIATE INCOME Key point: Making sure your investments perform sufficiently to match the income you plan to take in the future. You may decide to take the available tax-free cash and leave the rest of your pension invested. There is no requirement to take an income if you don t need or want one. In this case your investment strategy will depend not only on when you plan to start drawing an income but also how. Investment strategies to consider: If you are planning to buy an annuity You have the option to purchase an annuity at any time. It could be wise to start gradually reducing investment risk as you get nearer to your intended purchase date, for instance by moving more of your investments to cash. Long-term investing in shares and funds If you don t intend to take an income at all until much later in retirement you may be able to afford to be more aggressive in your investment approach. Your retirement could last years, over which time shares have historically out-performed other asset classes, although past performance is not an indication of future returns. Diversify Rather than invest in shares directly, which can be very volatile, you may wish to gain exposure through collective investment funds (such as a unit trust or OEIC). The investment manager spreads your money across a range of shares or other funds, spreading the risk. It may be worth choosing funds which invest across different countries and sectors, to increase the diversification. SCENARIO 4: TAKING HIGH WITHDRAWALS Key point: It is important to think about the size of the withdrawals you take and the time period over which they will be taken. Some investors may wish to take high withdrawals from a drawdown plan because they are not dependent on the income. Remember, withdrawals are subject to Income Tax. Taking the whole, or a large, amount out may be appealing but you should think about your personal Income Tax liability before you make a withdrawal. You might want to pay particularly close attention to this if a withdrawal could take you into a higher Income Tax bracket. There are other considerations too: your retirement could last decades, and you will need to ensure you have enough income to last. Your income needs are likely to change as you get older and your circumstances (including health and care needs) could also change. If you decide to spend all your pension, and this is your main source of retirement income, you may find state benefits alone are unable to support your current standard of living. It is likely your withdrawals will be personal, to fund a wedding or house purchase for instance. The size of withdrawal and time period may also be dependent on whether you have alternative sources of income available. Investment strategies to consider: Cash/low risk investments If you are looking to withdraw your entire fund over a period of less than five years and can t afford for the fund value to fall too far you might stick to cash. You would then avoid reducing the size of your pension pot if the market falls significantly before you have taken the necessary income. 19

20 Why choose Hargreaves Lansdown? Freedom, flexibility and control Freedom Take advantage of new pension freedoms. You choose how much income to take and when you want to take it. Investment choice: The Vantage SIPP offers more than 2,500 investment funds, including low-cost core trackers. There is a wide range of investment trusts, UK and overseas shares, gilts, corporate bonds, ETFs (exchange traded funds) and cash. Advice if you need it: The Vantage SIPP is designed for those who make their own investment decisions. Equally, we offer advice if you would like it, for a separate fee. You only pay for the advice you want. Control Stay in control of your retirement: There is just one company to deal with. You choose your own investments and manage your account online, by phone or post, whenever you wish. 24 hour online access means you can adjust your portfolio at the click of a button, on your computer, smartphone or tablet. Nominate your intended beneficiaries in the event of your death, and change this at any time. Flexibility No restrictions at age 75: You can remain in drawdown indefinitely, or buy a secure income at any time. We won t force you out at age 75. A choice of full or partial drawdown: You can choose to put all, or only some, of your fund into drawdown, depending on your requirements. Exceptional service Award-winning: Hargreaves Lansdown has been voted Best SIPP Provider by readers of What Investment for the last eight years running. We were also awarded the 2014 Gold Standard Award for Retirement. Expert help is only a phone call away: you ll speak to a real, knowledgeable person straight away, with no press one for this, two for that. NEW lower costs for drawdown: There is no set up fee, no fees from us to transfer in, no fee for drawing a regular income or one-off withdrawals and no fee to switch to drawdown under new pension rules. In fact, the only addition to our normal pension charges is an early closure fee where an account is opened and then closed within a year. Plus, exclusive super-low annual charges on top-performing funds and competitive annual management charges, together with online share dealing from 5.95 to a deal. 20

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