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Seeking pension drawdown advice from a financial adviser can be hugely beneficial when planning for your retirement. An adviser will guide you through the entire pension drawdown process as well as helping you access your benefits in the most tax efficient manner and providing appropriate advice about your investments.
Pension drawdown (also known as ‘income drawdown’ or ‘income withdrawal’) is when you take money out of your pension savings to pay out as a regular income. The remaining amount stays invested. Note that you can only move your pension pot into drawdown from the age of 55. (This is set to change to 57 on 6 April 2028)
Drawdown works by offering greater flexibility on how you receive an income during retirement. You can normally take up to 25% of your pension pot as a tax-free lump sum while the rest remains invested with the potential to grow. You do not have to take this all at once. Maximum tax-free cash will be frozen at £268,275 from 6 April 2024 unless you have a protected higher amount.
When taking money from your pension, you have two options - pension annuity or pension drawdown.
Offering a guaranteed income, a pension annuity is a financial product that can be purchased using your savings. With a pension drawdown, you withdraw a portion of your savings while the remainder stays invested - subjecting it to market fluctuations. You can allocate some of your pension to each and some choose to match their essential expenditure e.g. food, energy and housing costs with a guaranteed income.
Both options have their own set of advantages and disadvantages, however, our expert advisers can offer expertise on both, ensuring you maximise your pension income in the long run.
If a pension drawdown is something you want to add into your financial plan, our independent financial advisers can help. Our independence means we have access to all investment products on the market, enabling us to offer unbiased advice and create a bespoke financial plan for your needs.
When it comes to pension drawdowns, our advisers can assist with the following:
Important - Investment involves risk. The value of investments can fall as well as rise. You may get back less than you originally invested. Bear in mind that tax rules can change and their impact on you will depend on your circumstances.
Book a free call with our team of advisers for expert pension drawdown advice and how to add it to your retirement plan.
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Although you can withdraw a 25% tax-free lump sum, this amount may not be sustainable for your retirement plans and is dependent on several factors.
When calculating your pension drawdown rate, the following needs to be taken into consideration:
You can transfer your pension drawdown to another provider. However, be wary of potentially high exit fees and a loss of guaranteed benefits.
Some notable benefits of transferring your pension drawdown include greater investment options, the potential for lower maintenance fees, as well as the advantages that come with pension consolidation.