What is income Drawdown

Income drawdown is a retirees option of drawing their monthly pension from an Income Drawdown Fund as opposed to traditional annuities offered by insurance companies.

The income drawdown fund is an investment product that allows a retiree to reinvest their accumulated retirement savings through a fund registered by Retirement Benefits Authority (RBA) and set up for the purpose of paying regular pensions to retirees.

This allows a retiree to benefit from income arising from investment of the lump sum and translates to higher regular payouts to the member.

The RBA provides a clear legal framework for all registered income drawdown funds.

Kenya’s retirement benefits regulations allow for pension scheme members to access up to a third of their savings as a lump sum at retirement and the balance used to purchase of a regular pension through an annuity or an income drawdown fund.

Is income drawdown the best option to manage your retirement funds

Not necessarily. It has its advantages and disadvantages. Also depending on the retirees circumsatance annuity may be a better option. Consult a knowledgeable manager to explain clearly using your specific situation.

These benefits may lead one to conclude that Income drawWith so many benefits to be enjoyed through an income drawdown fund, I may be inclined to say that it is the best option, however, it would be a fallacy to conclude that it is automatically suitable for all retirees.

This ensures the rights of the retiree are protected given the long-term nature of the investment. The maximum payout is 15 per cent of the purchase price per year whereas the minimum drawdown period is 10 years.

Therefore, if a member has invested a lump sum of Sh5 million they would be able to draw down up to Sh750,000 per annum or 62,500 per month. This payout may be sustained for a period of between 40-50 years assuming the prevailing economic conditions and a stable interest rate environment is maintained.

The maximum drawdown limit of 15 per cent is required to ensure the funds are not exhausted during the lifetime of the member thereby providing some protection from the risks associated with longevity.

Advantages of income drawdown

  • They offer stable investment returns since the funds are invested conservatively with the aim of preserving capital and achieving modest growth over the long-term.
  • It also effectively meets the cashflow needs of a retiree.
  • Income drawdown funds also afford the member the opportunity to leave an inheritance in the event of demise at any point in time without any guarantee period restrictions — as long as there remains a balance in the member’s fund.
  • The member has the flexibility to review their options after the minimum drawdown period of 10 years.
  • After the 10 years, the member will choose whether to access the balance as a cash lump sum, purchase an annuity or continue participating in the income drawdown fund.



  • do not guarantee protection from the risks of longevity
  • risk of depleting the fund
  • you manage your investment
  • no suitable for small amounts

The legal structure also ensures the safety of members funds since all monies are managed by separate and independent service providers for administration, custody and investment under the oversight of trustees and independent reporting to the RBA.

READ: Why it’s critical to start saving for retirement  early

There is transparency in the management of the fund with members having the opportunity to interrogate the audited financial statements, attend annual general meetings and receive their individual balance statements annually. Income drawdown often provides additional benefit enhancements that vary with each fund.


On your part

It is important to get professional advice that takes into account your income, liabilities and assets in order to formulate a retirement plan that will enable you to enjoy a sustainable lifestyle in retirement.