Income without limits

Flexible Access Drawdown

Take your pension income they way you want to.

What is Flexible Access Drawdown?

At retirement, you have the option to choose how much money you want to take out of your pension. This is called Flexible Access Drawdown, which became available for everyone in April 2015. This option allows you to take out an income that isn't restricted by the Government Actuary Department (GAD) rates, which were previously used to determine how much you could take out of your pension pot.

With Flexible Access Drawdown, you can take out as much or as little money as you need, whenever you need it. This means you can tailor your income to suit your circumstances, such as paying for necessary expenses or taking a trip you've always dreamed of. You also have the flexibility to take out the entire pension fund, although it's important to note that taking out all your money at once can be risky. If you spend it too quickly, you may not have enough left for your future needs, such as unexpected expenses or long-term care costs.

It's recommended to speak with a financial advisor before making any decisions about how to access your pension pot, especially if you are considering Flexible Access Drawdown. 

How Flexible Access Drawdown Works

Tax free lump sum available

Variable income (no upper limit)

Flexibility to take just the tax free lump sum if required

The fund stays in a favourable tax environment

Fund remains invested - it could grow but could also go down

Ongoing monitoring of the performance is required

Pros of Flexible Access Drawdown

Flexibility: Flexible Access Drawdown allows you to take out as much or as little money as you need, whenever you need it, giving you greater control over your retirement income.

Tax Benefits: With Flexible Access Drawdown, you can take out 25% of your pension pot tax-free, and the rest will be subject to income tax at your marginal rate. This can potentially reduce your tax bill.

Inheritance: If you die before the age of 75, your beneficiaries can inherit your pension tax-free. If you die after the age of 75, your beneficiaries will pay income tax on the inherited funds, but they will not have to pay inheritance tax.

Investment Control: With Flexible Access Drawdown, you can choose how your pension pot is invested, giving you more control over your investments.

Cons of Flexible Access Drawdown

Risk of Running Out of Money: Taking out too much money from your pension pot can result in running out of funds, leaving you with insufficient income to support yourself in retirement.

Investment Risk: If your pension pot is invested in high-risk assets, such as stocks and shares, there is a risk that the value of your pension pot could decrease, reducing your retirement income.

Impact on Means-Tested Benefits: Taking out money from your pension pot can impact your eligibility for means-tested benefits, such as pension credit and housing benefit.

Potential Fees: Some pension providers may charge fees for Flexible Access Drawdown, which can reduce the amount of income you receive.

Case Study

Meet John, he is 61 years old with a £210,000 pension fund

John has decided to enter drawdown as he sees it as an ideal way to control the income he receives while limiting the taxation he pays.

John doesn’t want much income this year as he has retired, half way through the tax year and wants to avoid breaking through the high tax rate threshold.

He opts to withdraw £3,000 to spend on a holiday.
However the following year he is planning on withdrawing £25,000 and due to him being retired will be using this as his main source of income.

As it will be a new tax year he doesn’t have to worry about the top tax bracket.

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