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Free Pension Drawdown Consultation

Do you want to make sure pension drawdown is the best option for you?

Are you worried about running out of money during retirement?

What is pension drawdown? What are its advantages? Read through this article to get the concepts of pension drawdown explained in a nuanced yet easy to understand manner.

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What is Pension Drawdown?

If you have a defined contribution pension scheme, you will know that your pension has been built up over time dependent on the payments you / your employer have contributed to over time. The amount in the pension not only depends on the amount contributed to, but the performance of the investments within the pension. Pension drawdown is effectively one option of taking money from your pension pot as income, and leaving part invested. Other names for this can be known as income drawdown or income withdrawal. The basic qualifying rules are:

  • You must be aged 55 or over
  • You have a defined contribution scheme in place

What are the rules for pension drawdown?

The main influencer on pension drawdown was the Pension Freedoms. The rules were changed to effectively give people greater flexibility to accessing their pension savings at retirement. Prior to these rules, individuals had to purchase an annuity, which was argued to be advantageous in some areas, but not favorable in terms of choice and flexibility. The table below outlines some of the new the options available:

Pre 6 April 2015 Post 6 April 2015
Purchase an Annuity – Providing a fixed and guaranteed income for life
  1. Leaving the pension pot untouched
  2. Flexi access drawdown
  3. Uncrystallised Funds Pension Lump Sum
  4. Cashing in the pension pot in one go
  5. Mixture of options

Schemes set up after the 6 April 2015 are known as ‘Flexi access drawdown’.  With this option you can:

  1. Take up to 25% of the pension savings tax free in one go, upfront
  2. Withdrawn all of it in one go
  3. Take regular monthly, or annual payments
  4. Take a series of lump-sums on an ad-hoc basis

Schemes set up before the 6 April 2015 are known as ‘capped and flexible drawdown’. With these options you can:

  1. Capped drawdown: the rules set out are strict and outlined by the government which stated
  • There is a limit to how much you can draw
  • The maximum you could take is 150% of the annualised income if you had bought an annuity
  1. Flexible drawdown:
  • This allowed individuals to take as much money out each year
  • To qualify, you needed to be receiving at least £12,000 a year from pension income outside of the pension in question

5 Tips on Pension drawdown

Tip 1: Is pension drawdown right for me?

Drawdown may suit some people more than others, but the big considerations for drawdown are illustrated in the table below:

May be Worth considering if you:  May not be worth considering if you:
  • Want your money to continue to be invested (subject to your risk profile)
  • Want flexibility to access funds on an ad-hoc basis
  • Want to vary amounts of how much to take out on a year by year basis
  • Want to be tax efficient
  • Want peace of mind knowing you have a guaranteed and fixed income each year
  • Are worried about running out of funds
  • Don’t want to pay charges (investment charges, advice charges, other associated investment charges)
  • Are concerned by investment risk

Tip 2: What charges to expect?

Pension Drawdown is not free. Comparing costs for drawdown can be complex as providers have different charging structures, and you may find that there are between 1-8 separate types of fees depending on the providers that you opt into for pension drawdown. These can include:

  1. Set up fees
  2. Annual administration charges
  3. Dealing and trade charges
  4. Platform fee
  5. Adviser charge
  6. Withdrawal fee
  7. Converting your pot into an annuity
  8. Exit fees / penalties

Tip 3: What are the tax implications of pension drawdown?

Tax Whilst Alive

The first 25% you take from your pension pot is completely tax free.

Let’s assume you need to make withdrawals, the subsequent withdrawals made are subject to income tax. For the purposes of this, we are using the income tax rates of 2019/2020 in England, Wales and Northern Ireland (tax in Scotland is different and does not apply to this example):

Calculation Box

  • If you have no income from any other sources, the first £12,500 is tax free
  • 20% tax is paid on the next £37,500
  • 40% tax is paid on everything above £50,000 (£12,500 + £37,500)
  • 45% tax is paid on everything above £150,000


Raj is 55 and retired. He opts for income drawdown on his £500,000 pension. He has no income from anywhere else. He wants to take his 25% tax free lump sum and on top of this, he wants another £32,500 from his pension. The calculation is as follows:

  • 25% tax free = £125,000

The further £32,500 is taxed as follows:

  • £12,500 is then tax free (as he has no income from anywhere else that tax year)
  • 20% tax is then paid on the remaining £20,000

Total Tax to be paid = £4,000

Tax at Death

Previously, if you passed away, the amount of tax used to be 55% on your remaining pension. This has changed and can be split into two key areas:

Death Under 75 Death Over 75
  • All pension funds left by someone who dies can be inherited tax free.
  • This can then be taken as regular income, or as a whole lump sum.
  • The person who inherits your pension will pay tax at their marginal rate of income tax.
  • This can then be taken as regular income, or as a whole lump sum.
  • Death benefits can be left to anyone – an expression of wishes form is crucial to this, so make sure this is up to date.

If you are already in pension drawdown, the rules slightly differ. Your pension will convert to flexi-access-drawdown from 6 April 2015.

Tip 4: What restrictions to expect?

Every year, the taxman allows you to contribute a maximum (that is if you are eligible based on earnings) of £40,000. Once you enter a drawdown arrangement, the rules change.

Once you take more than 25% tax free lump sum, the annual amount you can then contribute drops to £4,000 regardless of earnings. This is known as the; Money Purchase Annual Amount (MPAA).

Don’t get confused. This rule doesn’t apply if you are already in a capped drawdown plan. If you are remaining in capped drawdown, you can continue to contribute £40,000 a year into your pension pot.

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Important Information

The value of Investments is not guaranteed and can fall as well as rise and you may not retain the amount you originally invested.

If you drawdown too much Income or your investments underperform, you run the risk of running out of funds.

The value of pensions and the income they produce can fall as well as rise, you may get back less than you invested.

The Financial Conduct Authority do not regulate inheritance tax planning and trusts.

Both Black Lion Insurance & Black Lion Wealth are Trading Styles of PRG Protect Ltd

What are my other options?

Income drawdown is a popular way of accessing income from your pension, but there are other options to consider:

  1. Purchasing an Annuity;

An annuity effectively means you use your pension savings to buy a guaranteed income for the rest of your life. You can use part of your pension pot to buy an annuity while leaving the rest in drawdown, or you can do one or the other.

  1. Uncrystallised Funds Pension Lump Sums (UFPLS);

in simple terms, this is another way to take money out of your pension pot without opening an income drawdown plan. This is by taking ad-hoc withdrawals from your pension. You can take your whole pension pot in one go, or a series of smaller lump sums as an when you want. If you decide to access your pension this way, the first 25% of your withdrawal is tax free, whereby the next 75% is subject to income tax.

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We love what we do, and more importantly, we are qualified to do it – we aim to provide a fully comprehensive service to all our clients.

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We Refine YOUR plans

  • Nothing stands still. We will sense check the progress of your plans regularly, we suggest this is done once a year
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Pensions Advice

Yellow umbrella iconHow Black Lion Wealth Can Help

We offer specialist advice on:

Self-Invested Personal Pensions (SIPPs)

A self-invested personal pension (or SIPP) is a type of defined pension scheme.  In other words, it’s a private personal pension plan that enables you to plan for your later years, when you are no longer working.

Ideal for contractors, director and the self-employed, a SIPP empowers you to be in control of your pension’s investment strategy.  There are some useful tax and legacy planning opportunities, too. Moreover, your spouse and your family could benefit.

Of course, the value of your retirement benefits will be determined by the amount of contributions you make and the period over which you make them.

The team here at Black Lion Wealth will be happy to offer you our advice to help you choose the right options.

Pension drawdown advice

Part of the pension freedoms legislation of 2015, access to your own pension funds now offers powerful flexibility and personal autonomy.

However, pension advice from Black Lion Wealth could offer you all the financial security and peace of mind that you need.

Apologies, but you have to know what you’re doing here.  We understand every part of this regime.  This means that we know how to protect your hard-earned money from too heavy a tax burden.  Also, how to pass on its benefits to your family after your death.

If you drawdown too much Income or your investments underperform, you run the risk of running out of funds.

Don’t leave it to chance.


An investment in an annuity (buying a product that pays an income each year until you die) was – before 2015 – and still is, a viable aspect of retirement planning.

However, there’s a long list of considerations to think about here.  In other words, things to know and understand, such as fixed, variable, deferred income – lots of complicated terms.

Make sure that you get the advice you need from us before you decide.

Pension switch and consolidation advice

In our lifetime, most of us will have more than one job, each with a pension scheme as part a remunerations package.  You may wish to ask us about how to gather together all your “pension pots” into one place.

Not only can we offer you the benefit of our experience and expertise, we can also put the consolidation process into action.

Blue umbrella icon with gold coins	Pensions – where we are now

The range of pension options on the market has never been broader.

On the one hand, this is good news for the canny investor.  On the other, how do you know that you’ve made the right choice? How much should you save?  What are the different types of pension products out there?

We hope that we’ve convinced you to consider pensions advice.

We’re all living longer.  The retirement age is rising.  Life isn’t going to get any cheaper any time soon.  Building up your own private nest will make your retirement easier to plan.  Do the right thing today. Give Black Lion Wealth a call.  We’re here to help.

Blue umbrella icon with gold coinsPension Drawdown Advice

If you have a pension, you can actually use it as an income stream by leaving it in place and drawing on the interest. That can be a better financial decision than taking it as cash as soon as you’re eligible or buying an annuity as you leave your pension in place to start generating income of its own. 

However, leaving your pension invested in the market doesn’t come without risks, and if a disruption should hit the market, you could end up with less on your way to making more. But given enough time, and if you’re invested in the right markets and you have reasonably reduced your risk, you could stand to make more by parking that money. 

How Does It Work?

The beauty of a pension drawdown is that as of April 2015, you can draw as much or as little from your pension as you’d like, though to maximize your revenue stream you’ll want to leave as much in as you can. That said, according to new pension drawdown rules, you can withdraw up to 25% as a tax-free lump-sum, which can help you pay off bills or other large purchases like a car or home under these new flexible drawdown rules. 

But you can always withdraw less, and a piece of pension drawdown advice is to only take what’s absolutely necessary. After all, if you withdraw most of your pension, you’ll have less invested to help it grow, and that could limit your pension’s revenue stream. Furthermore, if you’re taking out too much each month, then your pension will be reducing in size instead of growing; at some point it’ll end up depleted altogether.

After the first 25%, you also have the option to withdraw the rest in one lump sum, though this is never good pension drawdown advice because you’ll get heavily taxed on the remaining 75%. Alternatively, you could elect to take out regular monthly or yearly payments as income while the rest of your pension stays invested, or you can even leave your pension alone and only take out a sum when needed, or not at all as you leave everything fully invested.

How To Enter Pension Drawdown?

If you’d like to start your pension drawdown, it all depends on the type of pension you have. A workplace pension may not allow drawdown until you’re of retirement age, and you may have to transfer it to another provider that will allow you to engage in drawdown. However, it’s good pension drawdown advice to check with your employer to see if you’ll lose any valuable benefits by transferring your pension or starting a drawdown.

If you have a self-invested personal pension, also known as a SIPP, or a workplace pension that allows drawdown, you may be able to move into drawdown by simply contacting your provider. 

Should You Drawdown Your Pension?

While everyone’s financial needs are different, there are reasons for and against pension drawdown. On the pro side, a drawdown gives you access to your money now when you may need it, and you’ll also get the ability to vary the money you take out if needed. A drawdown may also help you with tax planning if you discuss your needs with a financial planner — some strategies can minimize the taxes you’ll end up paying even if you withdraw a substantial amount. 

That said, your pension may not last long enough if you start drawing it down too early or if the amounts that you take out far exceeds the accrual of interest. Unlike an annuity, the money in your pension isn’t guaranteed, and you’ll also have to manage it on your own unless you hire a financial planner to help you make sense of it all. Would you like pension drawback consultation? Or perhaps you want to know the costs of pension drawdown advice? Call us on 0203 146 2259 for a free consultation and get all your queries and doubts resolved!

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We are a dedicated team of financial advisers, with years of experience in guiding our clients to a solution that meets their specific needs. We specialise in helping both employed and self employed individuals, as well as business owners on a variety of solutions, which range from life insurance, income protection insurance, keyman insurance and shareholder protection insurance.

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Black Lion Insurance & Black Lion Wealth are a Trading Style of PRG Protect Ltd

PRG Protect Ltd: Registered in England & Wales, No. 08286239.  Registered Office: 51 The Parade, Cardiff, South Glamorgan, Wales, CF24 3AB