IF YOU want to make your pension pot last throughout retirement, it can help to play by the rules.
That is why pension experts invented the 4 per cent rule, to stop people from spending their nest egg too soon.
The rule states that if you withdraw no more than 4 per cent of your pension each year, your pot should never run out.
Billy Burrows, director of pension planning specialists Retirement IQ, says that annuities have the benefi t of paying a guaranteed income for life, no matter how long you live: “However, many people are reluctant to tie into an annuity, especially at today’s rock-bottom rates.”
If you leave your pension invested instead through income drawdown, you can take 25 per cent of your pension pot tax-free, then draw income from the rest.
Burrows says this gives you much more flexibility, but also leaves you facing a tricky question: how much income should you draw?