If you’ve read part 1 (and you can do so here) you’ll have seen how a drawdown scheme can potentially be a more lucrative option than an annuity, given certain conditions. But things are never quite that simple, and we haven’t yet answered the second question I raised, which is:

What level of investment risk would you accept in exchange for the potential for more income?

This part is ‘the small print’. We saw in part 1 that a drawdown plan only needs to make an investment return of 2 per cent a year (plus charges) in order to beat an annuity very easily. Or did we?

Think again! That 2 per cent a year investment growth may seem like a very low level of return, but it’s not as easy as this. The spanner in the works here is known as the ‘sequence of returns risk’.

This is just the begining of an article I wrote and was published on www.unbiased.co.uk in February 2016