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How to compare the costs of income drawdown

When choosing a drawdown plan compare the various costs of different providers to get the best deal
How to compare the costs of income drawdown
  • It is difficult to compare the costs of different income drawdown plans as there are several different charges to consider
  • If you have a larger pension pot you may be better off with flat fee charges
  • Annuities are generally cheaper than drawdown but may provide a lower income

Drawdown has become increasingly popular since the 2015 pension freedoms, with many individuals opting for this form of retirement income rather than annuities. Unlike the latter, via which you receive a set income for life, with income drawdown you take a 25 per cent tax-free sum from your pension pot and keep the remainder invested. 

However, a downside of doing this is that it is very difficult to the compare fees and charges of drawdown plans, and there are vast differences between costing models. An investigation by Which? in 2020 found that the difference between the cheapest and most expensive income drawdown plans for a £250,000 pot over two decades was £12,300 in charges.

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