Drawdown
Are you reaching retirement and wondering how to access your pension savings flexibly? A flexible-access drawdown, often known simply as ‘drawdown’, could be the most suitable option for you
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What is Flexible Income Drawdown?
Flexible income drawdown is a popular method of accessing your pension savings that offers flexibility and control over your income. It allows you to keep your pension savings invested while withdrawing cash as and when you need it.
Depending on your objectives, you could take a lump sum or set up regular withdrawals, adjusting your income whenever necessary. So, unlike fixed options like annuities, drawdown offers flexibility to adapt to your changing needs.
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You can usually access your workplace or personal pension from age 55 rising to 57 in April 2028 with the option to take up to 25% of the value as tax-free cash.
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Your independent financial advisor can help you decide how much to take and when. With a draw down, your remaining savings are invested, and you have the freedom to tailor your retirement income to your lifestyle, financial circumstances, and goals. You may wish
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to set up a regular income, make oneoff withdrawals as required, or delay taking an income. The aim of a draw down is for your invested savings to enjoy healthy growth throughout the lifetime of your plan. But do note this depends on market conditions. It's vital to remember that
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all investments carry risk, meaning their value can fall as well as rise. Before deciding whether draw down is right for you, it's important to consider what level of income is sustainable and how much risk you can afford to take and are comfortable with.
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An independent financial adviser can recommend an investment fund or portfolio and income strategy that matches your needs. Monitoring investment performance, adjusting withdrawal rates and considering factors like longevity and inflation are essential elements of effective pension
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draw down planning. That's why my pension expert offer our draw down clients ongoing advice. By staying proactive in your financial management, you can navigate your retirement journey with confidence. If you invest in a flexible access draw down plan, your pension pot is invested. Your income
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relies on the performance of your fund. A draw down is usually a long-term investment. The fund value can fluctuate and can go down. Your income will depend on the size of the fund, the performance of the fund, the economic climate, and tax legislation. Any performance
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indicated in this video is for illustration purposes only and does not reflect actual fund performance. Past performance should not be used to predict future performance. Invested capital is at risk.
How Do You Know if Flexible Income Drawdown is For You?
At My Pension Expert, we take the time to understand your circumstances so we can provide personalised advice that puts you in the best possible position at retirement. With no obligation, our pension expert’s priority is to make sure you have confidence in the decisions you make regarding your pension, without needing in-person consultations.
The flexible income drawdown approach offers greater control, tax efficiency, and potential for growth compared to traditional annuities, allowing you to adapt your income to your lifestyle.
As your money remains invested, its value can fluctuate, meaning there is some level of risk involved. No two individuals are the same, what might work for someone else may not work for you so that’s why it’s essential to seek advice from our financial advisers to help you determine if flexible income drawdown aligns with your monetary goals and risk tolerance.
Is Drawdown Better Than an Annuity?
Both drawdown and annuities have their benefits; we wouldn’t say either option is better than the other.
What works for you depends entirely on your circumstances. Factors like your spending habits, pension value, desired lifestyle, and tax situation will influence what’s the best choice for you.
Choose Flexible Income Drawdown if:
You want control over your withdrawals
Are keen to explore investment growth potential
You want the ability to pass on funds to loved ones
However, you must be comfortable with investment risk and managing your money carefully to ensure it lasts throughout retirement.
Choose an Annuity if:
You prefer a guaranteed, stable income for life
Don’t want any investment risks
You value certainty and security over flexibility
We’d recommend speaking with one of our advisers to discuss which options could help you reach your retirement goals.
Steps To Set Up Your Flexible Income Drawdown
(Spoiler alert: we can support you with all of it! You can find out more about the ways we help you keep things simple here)
Identify your position
Choose a provider
Select your investments
Decide your income
Complete the paperwork
Transfer funds
Monitor investments
Understand taxation
At My Pension Expert, we advise you on which option is most suitable for your unique circumstances. We’ll make sure you clearly understand any risks and charges that apply so that you can make an informed decision.
We also manage the transfer process, with regular updates from our client support team, and can even help you manage and adapt your flexible income drawdown plan moving forward with the help of our ongoing pension advice service. So, with My Pension Expert, you can future proof your retirement strategy.
Tax-free cash
You can take a lump sum of up to 25% of your pension fund value in one go as tax-free cash. Or, you could choose to have 25% tax-free on each withdrawal. Your adviser will help you to understand how this could affect you.
Use your investment growth
When using investment growth, you only draw an income for the amount your fund has grown. So, say you have a fund value of £50,000 which increases by 5% over the year. In this scenario, you would withdraw this 5%, or £2,500, as income.
Using investment growth for your income removes the risk of your fund running out too early. However, it does mean that your income would be variable and dependent on growth.
Draw funds from capital
This lets you take money from your fund as needed. Your fund manager may dip into cash reserves or sell some of the investments that make up your portfolio, making sure it stays balanced to meet your requirements.
This lets you take a higher income, but you may run out of funds sooner. When choosing how much income to take, you should consider how long you need the fund to last so you don’t run out of money.
Don’t take any regular income
You may choose not to take a regular income, leaving the whole fund invested to maximise your potential investment growth.
Drawdown’s flexibility allows you to draw money from the fund as required, such as a one-off withdrawal, or switch on regular income payments later. It’s wise to discuss any changes to your income with an adviser, who will help you to understand how this may affect how long your funds will last.
Next Steps
Talk to a member of our team today to begin your retirement journey with confidence. There’s no obligation, just personalised advice to unlock your pension potential.
Want more information but not ready to get in touch? Our drawdown calculator can give you an idea of what a sustainable monthly income could look like for you.
Frequently Asked Questions
Need another question answering? Get in touch with us today.
Yes, you can still contribute to your pension after starting Flexible IncomeDrawdown, but your annual allowance may be reduced.
Yes, with Flexible Income Drawdown, you can usually pass on any remaining pension funds to your beneficiaries, often with tax advantages depending on your age at death.
Yes, you can switch from Flexible Income Drawdown to an annuity at any time, giving you the option to secure a guaranteed income for life.
If your pension pot runs out, you may need to rely on other sources of income, such as the State Pension or personal savings, to support your retirement.
