Pension drawdown

Keep your pension fund invested with the flexibility to take money as and when you need it and retain ownership of your pot.

What is pension drawdown?

Pension drawdown is a way of taking money from your pension, either as a regular income or as one-off payments as and when you need them. Unlike an annuity, with pension drawdown your savings are invested and you retain ownership of your funds, although your income is not guaranteed.

Also known as income drawdown, flexi-access drawdown, flexible drawdown, new drawdown or simply drawdown.

When can I start taking money from my pension?

If you are aged 55 or over and have the right kind of pension you can use drawdown to take money from it. Some people are using this to supplement their wages as they make changes to their working life. Others are taking the more traditional route, only starting to take an income from their pension when they retire. Don’t forget: the first 25% of your pension is tax free.

What do you mean by the right kind of pension?

You can use drawdown to take money from all private pensions and many company schemes. If you have what is known as a final salary pension with your company then you would need to transfer this to a different type of scheme before you could use pension drawdown to access your money. You need to be very careful if you are thinking about doing this as you could lose guaranteed benefits, such as an income for life, if you transfer out of a final salary scheme.

You cannot use pension drawdown to take money from the State Pension or unfunded public sector schemes which cover organisations and professions including the NHS, teachers, armed forces, civil servants, firefighters and the police. Also, pension drawdown is not an option if you have already purchased an annuity.

And what’s all this about tax-free money?

If you haven’t already, you can take the first 25% of your pension tax-free. Any other money that you take from your pot could be taxed as it counts towards your annual income allowance. So, if you do use pension drawdown you should also consider any other sources of income that you have, as taking more money than you need could push you into a higher bracket and result in a hefty tax bill.

If I choose pension drawdown, am I stuck with this forever?

Not at all. You can change your mind at any time and for whatever reason. For example, as you get older you might want to switch to a pension product that offers a bit more security or guarantees around your income. We have put together an overall picture of the different types of pensions available to you and the relative merits of each option

Does this mean that pension drawdown is a bit of a risk?

It is riskier than most of your other pension options. Equally, the rewards are potentially greater. Depending on how your savings are invested, if the stock market does well then the size of your pension pot should increase, something that will never happen if you buy an annuity. On the other hand, your savings could be badly affected by a stock market crash and if you are already taking an income when this happens there is no time for your pot to recover. It’s about getting the balance between risk and reward spot on, which is one of the many things we can take care of for you.


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Get a deeper understanding of the current pension freedoms with our FREE information guide. Complete the quick and easy enquiry form on the right and we will send you all you need to know about taking tax-free cash from your pension and what it could mean for you. We will also let you know how our no obligation pension review works; why it won’t cost you a penny to receive our full, independent advice; and how to take advantage of it.


What to look out for?

If you are thinking about pension drawdown and looking around to see what different companies and products have to offer, then there are some key questions to bear in mind. Of course, you can call us at any time and we will help you.

Are you dealing with a regulated company?

Getting regulated financial advice means peace of mind. Companies regulated by the Financial Conduct Authority are listed on their register; for example our registered company number is 754580. If a company is not listed then it cannot give you regulated advice.

How much will financial advice cost you?Sea clock

Pensions are complicated, so it makes sense to talk to an expert before making any changes to it. If you are interested in pension drawdown then an adviser will generally review your current pension provision before making the recommendation they think is best for you. And while the cost for this can vary wildly, we will not charge you a penny to get to this point.

How will your pension savings be invested?

The fees you are charged and the way your pension is invested could have a big impact on how long your savings last. All financial advisers should be very clear about how they propose to invest your money and why they think this is the right option for you.

What benefits might you be giving up?

Some pensions, especially final salary schemes, come with the promise of guaranteed benefits, such as a set income for life. If you have any current pension benefits then your financial adviser should clearly state what these are and whether or not it is in your best interest to give them up, in many cases it is not.

What will happen to your pension once you start to draw money from it?

People’s lives and circumstances change over time and the pension you need now might be very different to the one you need further down the line. This is why it is so important to choose a company that will continue to manage your pension, reviewing it at least once a year to check that everything is in order and recommend changes, if that is what is needed.


How can we help?

  • We will clearly show you if pension drawdown is the right option for you and what you could be giving up if you transfer out of your existing scheme(s).
  • We will do all of this as part of a pension review that will not cost you a penny.
  • There is no obligation and we only charge a fee if you agree with our recommendation and instruct us to make a change to your pension provision.
  • We can give you access to what we believe are the best funds available in the UK and our approach to investing is based on Nobel-award-winning research rather than a belief that we can predict the future.
  • We can continue to manage your pension, if this is what you want us to do, reviewing it annually to make sure it is on track to delivering what you need it to.

What could the impact on your life be?

Bike HandlesThe freedom to use your money as and when you choose, this is the impact pension drawdown will have on your life. As a result you could be in a position to make the most of those unexpected and last-minute opportunities in life.As the saying goes, though: with freedom comes responsibility. Pension drawdown should be used carefully, so that your pot lasts as long as you need it to.

Call 0800 304 7288 for a friendly chat about your pension

Stephen's pension documentary

Stephen finished his documentary

Documentary-maker Stephen took money from his pension to complete his long-in-the-making documentary “After ‘82”, which explores the history of the AIDS crisis in the UK. Click the link to watch Stephen's story.

 

 Watch the video

Alan's pension release story

Pension cash enabled Alan to clear debts

Alan had credit cards charging high rates of interest. Taking some tax-free cash from one of his pensions allowed Alan to clear the cards, and the rest remained invested for the future. Click the link below to watch Alan's story.

 

Watch the video

Finding Mark's pension

Finding old pensions changed Mark’s future

Mark wanted us to find his pensions from previous jobs. Tracking them down gave him almost £20,000 more for the future. We then combined them into a single pension fund, giving more control than before. Click the link below to watch Mark's story.

 

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Frequently asked questions

Can I leave my pension to loved ones?

Yes, it’s usually possible to leave money in your pension to one or more people when you die. Many schemes will let you pass on your savings, and if you receive a guaranteed income your provider may pay a lump sum or an income to your partner. If you’re thinking of buying an annuity then you need to be careful you choose the right one because not all of them will pay an income to someone else when you die.

Find out more

Are there any risks with pension drawdown?

Pension drawdown means that your pot stays invested with the aim of increasing its value and you can take money from it when you want to. There is always an element of risk if your savings are invested, although the trade-off is the opportunity for reward. In this case, the reward is having more money for your future. By investing your savings in a way that is right for you, we can help you to find your perfect balance between risk and reward.

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I want a guaranteed income, is an annuity my only option?

If you are one of the lucky people with a company pension that promises a guaranteed income when you retire then it’s likely you already have the right option for you. If you aren’t, then traditionally the only other way to receive a guaranteed income in retirement was by selling your pension fund to buy an annuity. Now, though, there is another way, giving you a fixed income with a level of flexibility that an annuity simply doesn’t provide.

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What is the difference between an annuity and pension drawdown?

If you are thinking of taking an income from your pension then two of your main options are: sell your pot and buy an annuity, or go into what is called pension drawdown. One offers greater security while the other gives you the freedom to take your money as and when you like.

Find out more

What is a no obligation pension review?

With this type of review a regulated pension expert will examine in detail your circumstances before clearly and simply advising what they think you should do with your pension. You will not have to pay for this review and you are not committed to follow the advice in any way.

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What are the pension options at retirement?

From the age of 55, the main choices are using your pension to buy a secure income for life, taking money directly from your fund as you need it or even taking the entire amount as cash. The right option for you depends on your circumstances and the type of pension you have.

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What are the new pension rules?

The new pension rules (also called pension freedoms) removed many of the restrictions around how you can take money from your fund; if you are at least 55 years old there is a good chance that you can take as much money as you want. Whether it’s the right thing for you to do or not depends on your circumstances and the type of pension you have.

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Important information

Pension drawdown is not suitable for everyone. It depends very much on individual circumstances; so you should have a chat with a financial adviser before making any final decisions.

On this page we talk about your pension and tax implications. Tax treatment depends on your individual circumstances and may be subject to change in the future.

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