Things to consider about flexi-access drawdown


Why do people choose flexi-access drawdown?

  • It’s a flexible way to access your pension savings
  • Your pension savings remain invested and could therefore increase in value
  • Your beneficiaries will normally retain complete flexibility on how to benefit from any unused drawdown funds on your death

How much income can I take from my flexi-access drawdown arrangement?

There’s no restriction on the amount of income you can choose to take from your flexi-access drawdown arrangement. So you have complete flexibility to decide how much income to take and when to take it.

If you’re relying on your pension savings to provide you with an income for the rest of your life you’ll need to carefully plan how much income to take. Otherwise you might find you don’t take enough income or you run out of money.

There are a number of factors to take into account when deciding how much income to take, these are:

  • How much income you need  
  • How long you expect to live for
  • How well your investments perform
  • How much you pay in charges

It’s also important you regularly review your flexi-access drawdown arrangement.

What are the tax implications of drawdown?

Any regular or one off income payments you take will normally be treated like salary. In other words they will be taxed under the Pay As You Earn (PAYE) tax system.  

Taking an income payment from your flexi-access drawdown arrangement is considered accessing your pension savings flexibly. When you do this for the first time the maximum amount you can contribute each year to a money purchase or certain hybrid pension scheme(s) without incurring tax charges reduces to £4,000. This is called your money purchase annual allowance.

What happens when I die?

Your nominated beneficiaries can still benefit from any unused funds when you die. They can normally choose from the following options:

  • Continue the flexi-access drawdown plan in their own name
  • Receive the full remaining value of your pension fund as a lump sum
  • Purchase an annuity
  • A combination of the above

If you die before age 75, the lump sum and/or income will normally be free of tax. If you die aged 75 or older the lump sum and/or income is taxed at the beneficiary's marginal rate of income tax. 

Who should I talk to about taking out income drawdown?

Income drawdown can be a complex area of financial planning, so we would recommend you seek professional financial advice. If you don't have an adviser, go to thepfs.org or unbiased.co.uk.

Alternatively, HUB Financial Solutions - part of the Just Group - offers an annuity comparison service that could help you make sense of your options.

Visit the HUB Financial Solutions website