What is income drawdown?
The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come.
Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Pension Wise.
Income drawdown is an option that enables people to take a flexible income from their pension fund when they reach 55 (increasing to 57 from April 2028). With flexi-access drawdown you have total control over how much money you withdraw and how often you take it while your pension remains invested.
The pros of income drawdown
- Your pension stays invested and could increase in value over time
- You have freedom over how much money you take from your pension
- You can control your income tax bill in retirement
The cons of income drawdown
- Your pension can fall in value and your income isn’t guaranteed
- Too many early withdrawals could mean you run out of money in later life
- Not all providers offer flexi-access drawdown as an option
- You could pay higher or additional rate tax when making pension withdrawals
Who is eligible for income drawdown?
Everyone is eligible for income drawdown as long as their pension provider offers it. The pension changes that came into effect in April 2015 scrapped the old capped and flexible drawdown and replaced them with flexi-access drawdown. This means anyone can take a flexible income from their pension with no minimum income requirements.
How much does income drawdown cost?
Most pension providers charge fees for setting up and processing your income drawdown payments. At Bestinvest we do not charge a fee for setting up income drawdown or crystallising benefits with the Best SIPP.
The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come. Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Pension Wise.
When considering a pension transfer, it’s important to check the investment options available and whether you need the wider choice offered by a SIPP as a new arrangement may be more expensive, especially if you have a stakeholder pension. You should also compare the charges and ask if you will lose any valuable benefits or features or incur penalties. If the pension is an employer-related plan, check if the employer will cease to pay in benefits if it is transferred elsewhere. If you have an occupational final salary pension scheme it is very unlikely to be advisable to transfer and advice should be sought.
Interested in income drawdown?
For more information on income drawdown or to open a Best SIPP please speak to our experts.
The Best SIPP
Our Best SIPP is a an easy to use, great-value personal pension. Find out more in our free guide to the Best SIPP.
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