How it works
If flexi access drawdown is an option for you, you’ll need to transfer the funds in your current plan to a new Self-Invested Personal Pension (SIPP) plan on our platform or a suitable plan with another provider.
When taking benefits from your SIPP, you'll usually be able to take a tax-free lump sum of up to 25% with the remainder being invested in a flexi-access drawdown account. Flexi-access drawdown is a flexible way to access your pension and is available from the normal minimum pension age of 55 (changing to 57 in 2028).
You’ll be able to decide on the frequency of the income payments and how much income you take (which is taxable) from your flexi-access drawdown account. This information is based on our understanding of current taxation law and HMRC practice, which may change.
A flexi-access drawdown account will:
- Let you take income from your pension fund while it’s still invested.
- Not guarantee an income for life like an annuity does.
- Allow death benefit lump sum payments to be made to a wide range of beneficiaries (one or more), who don’t necessarily have to be your dependant.
- Trigger a reduction in the amount you can pay each tax year into money purchase pensions when you take the first taxable income from your drawdown account. This is known as the money purchase annual allowance and is currently £10,000.
Any tax-free lump sum that you take from your flexi-access drawdown will be measured against your remaining lump sum allowance (LSA) and your remaining lump sum and death benefit allowance (LSDBA). Any tax-free lump sum that you take can't exceed the lower of your remaining LSA or your remaining LSDBA. You can find out more about this at GOV.UK.
Things to think about when entering flexi-access drawdown:
- What happens if your money doesn't last to the end of your lifetime?
- Do you have other income for your retirement?
- Do you need to take benefits now?
- Do you have a partner or dependants that rely on you financially?
- The value of an investment, and any income from it, can fall as well as rise and isn’t guaranteed. You could get back less than you invest.
- Taking income will reduce the size of your flexi-access drawdown account and the investment growth may not be sufficient to maintain the level of income you wish to draw.
- If you withdraw income at a rate greater than the growth achieved by your investments, your remaining drawdown fund will reduce in value.
- The level of income you take will need to be regularly reviewed.
How do you apply for it?
The ability to take tax-free cash from your pension and income withdrawals from flexi-access drawdown isn’t available under your current plan. This is only available under a new flexi-access drawdown product which can be with Aegon or another provider. To find out if you’re eligible please contact us. You should understand the risks and benefits of drawdown before you start.
The level of income is not guaranteed. Drawing income will reduce the value of your account. You may need to reduce your drawdown income in the future, in particular if investment performance isn't sufficient, or you live to a greater age than originally anticipated.
The level of income you take will need to be reviewed regularly. The income you receive may be lower or higher than you could receive from an annuity, depending on the performance of your investments. The rules governing how much income you can take may change. This could mean income drawdown no longer meets your requirements.
You can also contact a financial adviser for assistance. If you’re over 55, further information is also available via Pension Wise a service from MoneyHelper, which offers free and impartial guidance for understanding the options available on taking benefits from a defined contribution pension.