Tax treatment depends on your circumstances and is subject to change
Flexi-access drawdown is a way of taking money from your pension. As the name suggests there is a lot of flexibility when withdrawing your pension in this way, such as taking a regular income or one-off lump sums as and when you need to.
When withdrawing your pension via flexi-access drawdown, your savings stay invested and you retain ownership of your funds.
It’s important to remember that releasing pension money early is not right for everyone because it will leave you worse off in retirement.
You can use drawdown to take money from all private pensions and most workplace schemes. If you have a final salary pension with your company, then you would need to transfer this to a different type of scheme before you can use drawdown to withdraw your funds.
Final salary pensions are highly valuable as they come with great benefits such as a guaranteed income for life from a set age. This means that your retirement income is secure without having to worry about how your investments are doing. So, you need to think carefully before transferring out of this type of pension because doing so would mean giving up these benefits.
Drawdown cannot be used to take money from the State Pension or unfunded public sector schemes which cover organisations and professions such as the NHS, teachers, armed forces, civil servants, firefighters and the police.
Under current government rules, you can start to withdraw your personal and workplace pensions from the age of 55. And the first 25% of your pension pot can be taken tax-free. Based on the thousands of clients we have helped, some of the most common reasons for doing this include:
If you are considering taking your pension money from 55 then it’s important to remember that releasing pension money early will leave you worse off in retirement. A financial adviser will be able to help you plan ahead and know if taking money early is the right thing for you.
I’m sure you’ve heard that you can take tax-free cash from your pension. So, what does this actually mean? Well, typically, any money that you withdraw from your pension is classed as income and is therefore subject to income tax at your marginal rate. All except for the first 25% of your pension. This portion can be taken tax-free, meaning that you do not pay any income tax when withdrawing this money.
Absolutely. The beauty of drawdown is that it’s flexible. This means that you aren’t making any permanent changes to your pension and you still have full ownership over your funds. So, you can change your mind at any time and for whatever reason. For example, as you get older you might want to switch to a pension product that offers a bit more security or guarantees around your income. A financial adviser can run you through all the pension options available to you and help you decide what’s right for you.
We can help you to make the best possible decisions when it comes to your pension.
Taking pension money early is not right for everyone as it will leave you worse off in retirement. Also, tax treatment depends on your circumstances and is subject to change. That’s why it makes sense to get help from a regulated specialist.
