Flexible income, also known as Drawdown

Drawdown is a flexible way to access your pension when you're aged 55 or over (57 from April 2028). After taking your tax-free cash, you invest the remainder of your pension to access when you want. You enjoy flexibility over how and when you withdraw the remaining money.

You’re responsible for managing your money through your retirement, so should feel comfortable with doing this.

If you’re looking to transfer only part of your pension into drawdown, this is not something we currently offer so this product may not be suitable for you. However, we can accept one pension pot that you’ve already taken tax-free cash from.

Before choosing pension drawdown, it's important to understand the main taxation rules:

To be able to access your tax-free cash, you'll need to do this at outset as you can't take your tax-free cash after you've moved your pension pot into drawdown.

The first 25% of your pension pot is usually tax-free. All income or subsequent drawdowns will be subject to income tax.

This means that if you take large amounts out in a single tax year, you could end up in a higher tax bracket, and pay a higher rate of tax, than you would otherwise.

Alternatively, if you take the same amounts over a number of years, you could pay less tax.

For example, if you had £100,000 in your pension pot and took your 25% tax-free cash, you'd have £75,000 left. Depending on how you take this, you may pay more or less tax.

If you take it all as cash in the first tax year, then assuming you have no other taxable income, the tax you will pay will be: 

If you spread your drawdown over two tax years, then assuming you have no other taxable income, the tax you will pay will be: 

The amount of tax you pay on your income from the plan will depend on your individual circumstances.

Any tax you need to pay will be deducted from your withdrawals by your pension provider before the withdrawal is paid to you, just like an employer deducts tax before paying you a salary or wage.

When you take your first withdrawal, you'll probably be taxed on an emergency tax code. If this results in you overpaying tax in that tax year, you should receive a refund after the end of the tax year, alternatively you may be able to claim it back directly from HMRC during the tax year. Tax rules may change in the future and are subject to your individual circumstances.

From 1 June 2022, the Financial Conduct Authority now requires pensions providers to refer customers to Pension Wise guidance and explain the nature and purpose of this guidance, when they decide to access their pension savings.

Pension Wise from MoneyHelper is a free and impartial Government pension guidance service.

Your decision about which options to choose is likely to be influenced by many factors, such as how much income or cash you need now and in the future. You should also consider your personal circumstances and the impact that your choices may have on taxation, State Benefits, Annual Allowances and any dependants.

Choosing between pension drawdown and an annuity is an important decision. There are several key areas you should look at when making your decision, including whether you want a guaranteed income for the rest of your life, or whether you want a more flexible approach.

No, if you can't complete your application then you won't be able to save it for later. You'll need to re-start the application. If you're ready to apply, you'll need details of your current pension provider, estimated value of your pension pot, and policy number, as well as your National Insurance number.

Flexi-access drawdown was introduced in April 2015 and replaces what was previously called flexible pension drawdown. The main difference is that with flexi-access there is no requirement to have a minimum income from other sources.

All drawdown products are now designed to offer flexi-access drawdown.