Pension Income Drawdown

An alternative to taking an annuity.

From age 55 rather than taking the 25% Lump Sum (pension commencement lump sum) and using the remaining 75% to purchase an annuity, you may instead have the option to take the lump sum and leave the remainder invested without taking an income or start to draw an income from this remaining fund now.

This is a more complex area and definitely requires advice but is an increasingly more popular option for our clients.

This is commonly known as Income Drawdown or Flexible Access Drawdown.

Unlike taking an Annuity income, Income Drawdown does not necessarily give you a guaranteed income for the rest of your life. It may however provide you with a higher income than an Annuity subject to investment returns.

It must be noted that this is option is not suitable for all and is a higher risk option than a standard annuity, however it is worth speaking to a financial adviser who has the expertise to explain the how this type of plan works.

Advantages of Flexible Access Drawdown:

  • If invested appropriately your pot may grow
  • You can draw a regular income or occasional lump sums (potentially subject to tax)
  • On death the pension pot can be passed on to someone else
  • You can still use the pot to buy an annuity in future if you wish


  • The investment could fall in value
  • Any income or lump sum (after Tax Free Cash) is taxed as earned income
  • Income is not usually guaranteed

Can I just take the Tax Free Cash?

In most instances, if you have a personal pension, you should be able to take the tax free cash without having to take the pension, however your existing provider may not have the facility to do this and you may need to move the pension to specialist drawdown pension provider. This is not something you can do yourself and you must take advice.

This is a specialist area that we can advise you on.

Do I have to wait until I retire to take the lump sum?

No. If you have Personal Pension you can potentially take the Tax Free Cash from age 55. You don’t have to retire and you don’t have to take the income from the pension at this stage. Again this is an area in which you should always seek advice for a financial professional who can show you the upside and downside of this option.

Contact Us now for a free initial consultation.