Transcript

If you like keeping your options open and don't mind doing a bit of financial homework, then you might want to manage your pension income yourself. You could choose to move your pension pot into drawdown. You can then take your 25% tax free lump sum while leaving the rest of it invested where it can continue to grow, taking further money when you need to, either as a regular income or occasional lump sums.

With this approach, you're responsible for managing your own pension pot, and taking decisions to make sure that you have enough to live on while still leaving money invested so that you don't run out later in retirement. Ultimately, any money that's left in your pot becomes part of your estate.

Taking your pension this way means that you'll benefit if investments do well, but you'll also carry the risk if investment performance is poor. A significant concern with the drawdown approach is that predicting how long you'll live, and therefore how much money you'll need, is far from an exact science. Based on national averages, a woman of 68 today has a one in four chance of living to 94, and a 1 in 20 chance of reaching 100.

Unless the withdrawal of money from a pension pot has been very carefully managed, by that age, and potentially when her needs are greatest, the funds might have been long spent. Of course, you can combine approaches, and perhaps have the drawdown approach in the earlier years of your retirement. And then in later years, either buy an annuity or choose other approaches that require less ongoing financial management.