Taking a flexible pension income

Giving you the freedom and control over how you collect your pension pot


What is a pension drawdown?

A pension drawdown, otherwise known as a flexi-access drawdown (FAD), is one way you can take your pension. It gives you access to your pension savings while your remaining funds stay invested.

One of the ways you can approach a flexi-access drawdown is to take an initial tax-free lump sum of up to 25% of your pot, before moving the remainder of your pension into funds. You can decide which funds you invest in based on your investment objectives and the level of risk you’re comfortable with.

As with all investments, an annual review is recommended to make sure your investments are on track or still suit your financial goals. You also have the option to take a regular income which can be adjusted depending on your fund performance or take additional cash lump sums.

When you pass away, your nominated beneficiary will have the flexibility of choosing how they take the remaining benefits from your flexi-access drawdown.

Is a pension drawdown right for me?

Taking a flexi-access drawdown could be a way to fund your retirement or subsidise a phased retirement, using your pension pot in cash lump sums along the way. If you have a secondary source of income, like savings, taking a flexi-access drawdown could be a great way to get a boost to your income when you need it the most.

To be eligible for a pension drawdown, you must have a defined contribution pension and be over the age of 55. It’s important to note that not all pension providers offer this option, so you may need to transfer your pension pot to another provider. Just bear in mind that there may be fees to pay.

If you’re thinking of taking a flexible pension income, here are some things to consider:

A flexi-access drawdown lets you keep your options open, giving you access to your pension savings whilst still being invested
Your income isn’t guaranteed for life and could run out, so you’ll need to manage your investments carefully
You’ll have control over your pension savings and the funds it’s invested in
More control can often lead to more complexity, as you’ll need to regularly review your investments, sometimes with the help of a Specialist Financial Adviser
You’ll have access to flexible death benefits, giving you peace of mind for when you pass away
Your money may not be enough to support a long retirement or death benefits, depending on the performance of your funds and how long you live
If you decide to take an income, you can change the amount you receive to suit your changing needs
If you’d prefer a fixed-term, guaranteed income, an annuity may be a better option
You’ll have the potential to increase your income and protect your cash from inflation
As with all investments, there’s a potential for poor performance, and a loss of money if markets fall

Other pension options

Pension drawdowns offer you flexibility, but they aren’t for everyone. If you’re unsure whether a drawdown is for you, speak to a Specialist Financial Adviser from Wesleyan Financial Services for advice tailored to your circumstances and financial goals. They can help you understand all your pension options, to enjoy a comfortable retirement.

In the meantime, you can use our handy comparison table to see other ways you can take your pension:

Annuities Taking your whole pot as cash Cash lump sums Drawdown
Provides a regular income?
Provides a secure income for life?
Allows you to change your income?
Is your remaining pot still invested?
Affected by the stock market?
Can it provide an income for a dependant?
Can I take my pension from age 55?

This table is an illustration of your possible pension options. The options available to you will depend on your individual circumstances, including the type of pension you have.

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Taking a guaranteed pension income 

Looking for a stable income for your retirement? You can purchase a guaranteed income for life, otherwise known as an annuity, to give you some peace of mind during your later years. 

Taking a cash lump sum

Get access to your entire pension pot by taking all or some of your pension fund as cash lump sums. The first 25% is tax-free, but you will have to pay income tax on the rest.

What are your pension options at retirement?

You’ve worked hard for your pension. Now it’s time to make your pension work for you. Find out more about your pension withdrawal options at retirement.