Drawdown or annuity: questions worth asking first

Pension freedoms allow many people to leave funds invested and draw income as needed. An annuity purchases a contractual income, often for life, in exchange for a lump sum.

Ask how much of your essential spending is already covered by the State Pension and any defined benefit income. Guaranteed layers reduce the pressure on flexible drawdown.

Consider longevity, health, and whether a partner depends on continuing income. Annuity rates vary with age and health underwriting; drawdown depends on investment returns and withdrawal discipline.

Tax treatment differs: large withdrawals can push you into higher bands in a single year. Spreading withdrawals—or blending annuity and drawdown—can smooth that path.

Neither route is automatically superior. The useful answer is the one that matches your spending floor, appetite for investment risk, and wish to leave capital to others.

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