Flexible Drawdown

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What is flexible drawdown?

An alternative to buying an annuity, a drawdown allows you to keep your pension fund invested, whilst still benefiting from any future investment growth. The majority of your pension fund remains invested, with an income accrued from the growth.

Flexible drawdown is also known as flexi-access drawdown, due to the increased flexibility it provides over other types of pension. This greater flexibility can also reduce the amount of tax you pay on your pension.

Flexible drawdown products are typically sold to those who have built up a big pension pot. Life is unpredictable – the major appeal of drawdown is the flexibility to vary income to meet changing needs.


How does flexible drawdown work?

You have greater control over your pension fund with flexible drawdown, as you choose how you wish to take your pension. You can either withdraw your funds in lump sums, or take a regular income.

To qualify for flexible drawdown, you must have a fixed amount of secure income from a source such as a final salary pension. There are no income withdrawal limits with flexible drawdown, so you can withdraw a tax-free sum, then drawdown the whole pension fund over a time period of your choice.

You can choose who you would like to receive any funds in your drawdown when you die.

Not all pension funds over flexible drawdown, so you should ensure you check the details of your individual policy.


Are there any risks associated with flexible drawdown?

You should carefully consider how much you can afford to withdraw from your pension fund using flexible drawdown.  If you withdraw too much too early, you live longer than you’ve planned for, or your investments don’t perform as well as expected, there is a risk that you could leave yourself insufficient funds in your retirement fund.

If you choose to take advantage of flexible drawdown, you should review your investments regularly.