Since pension freedoms in 2015, UK retirees can choose between drawdown, Annuity or a mix. Living off a portfolio safely needs a different mindset from accumulating one.

Key takeaways

  • Sequence of returns risk is highest in early retirement years.
  • The classic '4% rule' is a US starting point - UK conditions differ.
  • Annuity rates rose materially after 2022 (UK insurer data).
  • Flexi-Access Drawdown (FAD) gives flexibility but transfers Investment risk.
  • Cash buffers reduce the need to sell at market lows.

Drawdown basics

FAD, UFPLS and small-pot lump sums are the main UK drawdown structures (HMRC).

Safe Withdrawal rates

UK-specific studies suggest something below 4% real for a 30-year horizon, depending on portfolio. Future returns are uncertain.

Hybrid strategies

Annuitising part of the pension to cover essential spending, with drawdown for the rest, is a common approach.

What this means for UK investors

Retirement income planning is one of the most consequential financial decisions UK households make. Most people benefit from at least one session with a regulated adviser.

Risks to watch

  • Sequence of returns risk.
  • Inflation eroding fixed annuity income.
  • Drawing too fast.
  • Pension scam risk - check the FCA register.