Pension Income Calculator

What is Flexible Access Drawdown?

Drawdown is one of the most flexible ways to access your pension fund. You keep your pension fund invested while also drawing an income from it. You decide how you would like to invest your funds and how much income you take if any. When you move your funds into drawdown up to 25% of the fund can be taken as a tax-free lump sum. The income you take is taxable.

Advantages of Drawdown

  • Offers a flexible income with the potential for capital growth
  • There are no limits and you have complete control and flexibility for taking income and cash
  • You can choose how you want to invest – according to the level of risk you want to take
  • You can access your pension in a way that meets your needs e.g. making a withdrawal to cover a one-off purchase
  • You can use your income drawdown fund to buy another type of retirement income product at any time
  • If you die, any money contained within your drawdown plan will automatically be left to your estate

Disadvantages of Drawdown

  • Unlike a lifetime annuity which provides a guaranteed income for life, drawdown involves more risk and your income is not secure
  • You will have to regularly review how your drawdown plan is performing
  • You run the risk of running out of money if you take too much income, or if your investment does not perform as well as you had planned for.
  • If you choose to buy an annuity at a later date, the income may be less than if you had bought one at the outset.

Read more information on how Flexible Access Drawdown works

Hybrid Solutions

Since the new pension freedoms came into force in April 2015, several ‘hybrid solutions’ have been developed. Such combinations include drawdown with built-in income guarantees, drawdown combined with a lifetime annuity, and flexible access drawdown combined with a fixed term annuity. These solutions aim to offer income guarantees, and the opportunity to grow your income over time, while also offering complete flexibility. These hybrid solutions can offer tax advantages, especially if you want to start and stop your income.

 

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How does Flexible Access Drawdown Work?

  • 1

    Move your pension into drawdown

    You can move your pension into drawdown in one go or gradually. You can access 25% of the funds moved into drawdown as a tax-free lump sum. You can use all of your tax-free allowance straight away or save some for later.

  • 2

    Your investments

    The remaining pension is invested based on your retirement needs, income objectives and attitude to risk. Depending on the provider selected you will have access to a wide range of investment options and your pension savings have the opportunity to grow.

  • 3

    Taking an income

    You control how much income you wish to take (if any). You can change this amount and how often you take an income. You may decide you don't want an income but would like to withdraw cash as and when you need it. The income you receive is taxable and can fluctuate depending on the performance of your investments.

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