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Legal and General Pension Drawdown Formula:
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Legal and General pension drawdown allows you to take income directly from your pension pot while keeping the remainder invested. This provides flexibility in retirement income planning while maintaining potential for investment growth.
The calculator uses the Legal and General drawdown formula:
Where:
Explanation: The formula calculates the annual income you can withdraw from your pension pot based on your chosen withdrawal rate.
Details: Accurate drawdown calculation is essential for sustainable retirement planning, ensuring your pension lasts throughout retirement while meeting your income needs.
Tips: Enter your total pension pot value in GBP and your desired annual drawdown rate as a decimal (e.g., 0.05 for 5%). Ensure values are realistic for sustainable retirement income.
Q1: What is a sustainable drawdown rate?
A: Typically 3-5% annually is considered sustainable, but this depends on investment returns, inflation, and your life expectancy.
Q2: How does Legal and General manage the remaining pension pot?
A: The remaining funds stay invested, allowing for potential growth to help sustain your income over the long term.
Q3: Can I change my drawdown rate?
A: Yes, most pension drawdown plans allow you to adjust your withdrawal rate annually, subject to certain limits and regulations.
Q4: What are the tax implications of pension drawdown?
A: Drawdown income is taxable as income. The first 25% is usually tax-free, with the remaining 75% subject to income tax.
Q5: How does drawdown differ from annuity?
A: Drawdown provides flexible income but carries investment risk, while annuities provide guaranteed income for life but offer less flexibility.