The Finance Act of 1995 introduced the availability of pension fund withdrawal (PFW) - more commonly called 'drawdown'.

Many advisers consider it only immediately prior to a client's retirement.

Its availability raises fundamental matters for everyone for whom it may be appropriate.

Conventional wisdom is that funds in withdrawal need equity exposure to give them the chance to compensate for additional costs and the loss of mortality drag.

(Mortality drag is the subsidy in annuity rates provided by the actuarial prospect of early death which disappears as the survivors increase in age.) It should be asked whether a with-profits fund can provide the opportunity for this additional growth? If not, why should one invest in with profit funds prior to retirement?ReviewA strategic touch on the tiller can add immense long-term value in pension planning.

Older pension contracts (pre 1 July 1988) are technically retirement annuity policies (RAPs) and have important differences from their successors, personal pension policies (PPPs).

Crucially, PPPs are subject to the earnings cap (£87,600 for this current year) and RAPs are not.

But if the cap is to be exceeded, no payments can be made in that fiscal year to a PPP.

The percentage of net relevant earnings available to RAPs is lower after the age of 36.

PFW is not available from a RAP, but RAPs can be transferred to PPPs.

It is commonly believed that RAPs will provide a higher tax-free lump sum than the 25% available from PPPs but that is a dangerous fallacy.The formula for calculating the tax-free lump sum from RAPs is three times the remaining annuity after the tax-free cash is taken at the time the fund is used for retirement purposes.

The annuity is calculated on the basis of the cost of buying a single life level pension with no guarantee, payable annually in arrears.

For a RAP to give tax free cash in excess of 25% of the fund, the annuity rate must exceed 11.11% - for a male aged 60 the rate is currently under 9%.

More importantly, if you have a RAP, check: -- What happens to the death benefit if you die before you take the pension benefit? For IHT purposes you may not want it falling into your estate and -- What is that benefit? Many older RAPs offer merely a refund of contributions with or without some interest.In the early 1980s, Equitable Life (which does repay a return of the whole fund) produced figures based on 12% pa compound growth.If a man aged 30 invested £1,000 pa and died aged 60, a return of premiums with interest at 4% per annum was worth under £100,000.

Allowing for growth at 12% pa, the fund was worth in excess of £550,000.

It is madness not to check this point when you worked so hard to earn the premiums that went into the policy.

If this is a problem with your RAP, there are various options available including negotiating with the provider concerned , although it may want a medical report before changing terms.Start earlyThe importance of compounding small amounts over long periods of time cannot be over-emphasised.

John Train, a New York investment adviser writing in the Financial Times a couple of years ago, well illustrated this point in advice to a fictional nephew who had just reached his majority.

A sum of £2,000 per annum was put away for 8 years between the ages of 18 to 26 (total outlay £16,000) left alone and assuming compound growth of 10% per annum had reached a fund value of more than £1 million at age 65.CostsIt is expenses that can dramatically eat into a pension fund.

A 1% pa reduction in yield sounds innocuous but over the years can compound up significantly.

In addition, in the early years, it is important to consider a waiver of premium benefit.

That is in times of inability to work the pension provider effectively adds the premium to your pension fund.

You may have permanent health insurance but for the self-employed that will not be net relevant earnings and there could be financial hardship at, say, aged 60 if a pension fund has not grown sufficiently to take over from PHI payments.Choice of vehicleIf your employer offers a pension vehicle, it is nearly always best to take it.

Nowadays that is likely to be a grouped personal pension - effectively your own PPP.

If you want to make additional contributions that do not attract an employer's subsidy, look at some of the investment trust PPPs which have come on to the market in the last three to four years.

The early ones have only a 0.5% per annum charge.

The later ones have that capped and Alliance Trust has no ongoing management charge at all, providing one has at least 100 Alliance or Second Alliance shares within the fund.These are effectively low-cost self-investment personal pensions (SIPPs) and are extremely good value if you do not want to frequently change.

Alliance Trust is a very blue-chip conservatively managed fund which has doubled over the last five years.

The Alliance SIPP is currently available to those with Schedule D earnings only, but that restriction is expected to be removed shortly.SecurityRemember that these investment trust SIPPs are not covered by the 1975 Policyholders Protection Act, which guarantees 90% of your entitlement with an insurance company if it goes into liquidation.

These SIPPs are covered by The Investors Compensation Scheme which provides a maximum of £48,000.The FSA recently introduced a consultative paper on the matter of protection which contained a suggested protection limit of £100,000 per investor.

Whilst one generally cannot have too much of a good thing, it is always prudent to spread one's pension provision.GenerallyDiscuss with your adviser your anticipated needs.

If you are too young to remember the stock market fall of just under 70% in 1974/75, ask your adviser to frighten you! The 30% fall in October 1987 was a comparative pin-prick.

These times can come again and it always makes sense - particularly as one gets older - to have some with-profits exposure.