Drawdown (flexible income)

A flexible income you can change – drawdown

Drawdown lets you take some or all of your tax-free cash, leaving the rest of your retirement savings invested.

You don't need to take an income at all but if and when you do, you can take a regular flexible income, one-off withdrawals or both – but only until the money runs out.

Drawdown can be complex so we recommend you seek advice before you choose this option.

With drawdown:

  • Generally only suitable for retirement savings of at least £50,000
  • You can take up to 25% of the retirement savings you move into drawdown as tax-free cash
  • You can take income and withdrawals when you want to
  • If you don't need an income, you can leave your drawdown pot invested
  • You're in control of your investment, so you have to manage it carefully

Here's how it works

Things to be aware of

No guarantees

The length of time you can take income for depends on the value of your drawdown pot, the amount you take as income, investment growth and charges. If your drawdown pot runs out before you die, your income will stop.

Investments can fall as well as rise

Poor investment performance will reduce your fund, so your income could be lower later in life and may not last as long as you want it to.

Not all retirement saving plans offer drawdown

You may have to transfer to another plan to move into drawdown. If you do this, you may be charged exit penalties. The ongoing charges on your new drawdown plan may be higher than the charges on your existing retirement savings plan.

You'll need to take control of your investments and income

Because your drawdown pot remains invested, you need to regularly review the income you're taking and the performance of the funds you're invested in. You could pay a financial adviser to manage this for you.

Impact on ongoing savings

If you take income or withdrawals from your drawdown pot, payments can still be paid into a pension plan but if these payments exceed £10,000 a year, the excess amount will be subject to a tax charge. If you just took the tax-free cash, and no further income or withdrawals, this tax charge would not apply.

Read more in 'A guide to pension tax'.

Tax and law

You'll see a lot of information about tax and law on this website. We've based this on our understanding of current UK law and HM Revenue and Customs practice, as at 6 April 2015. Bear in mind, any changes to these rules, or to your personal circumstances, could affect what you get from your retirement savings.

Watch out for fraudsters

Whatever you do, don't let the fraudsters get their hands on your retirement savings. Fraudsters may offer you tempting ways to invest your cash, they may seem convincing and promise big returns. But the impact on people falling prey to these scams can be devastating – you could lose the lot. Sorry, but if it sounds too good to be true, then it probably is.

How to avoid a pension scam

Annuities -
how do they work?

If you're looking for a regular secure income to see you through the rest of your life, then an annuity could be the route for you.

Annuities explained

Cash lump sum -
how much can I take?

You can take a cash lump sum from the retirement savings you've built up over the years – you don't have to take it all at once.

Cash lump sums explained

Looking for advice?

You can get free and impartial guidance from Pension Wise. We can also help you find a financial adviser to give you the advice we can't.
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