Flexi-access drawdown basics
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Quick answer: Flexi-access drawdown lets you keep pension savings invested while taking taxable income as needed — unlike an annuity, income is not guaranteed and can run out.
Drawdown became the default option for many DC retirees after pension freedom rules in 2015. You crystallise part or all of a pot, take tax-free cash, and leave the rest invested. This guide covers risks and tax.
Setting up drawdown
Most SIPPs and workplace pensions offer drawdown. You may take tax-free cash first, then leave the rest invested in funds you select.
Charges include platform fees, fund OCFs and sometimes drawdown administration — compare before moving. Higher drawdown fees compound over decades of retirement.
Managing income
Many retirees take a fixed monthly amount like a salary. Others take ad hoc lump sums for holidays or home improvements.
Keep a cash buffer inside drawdown for one to three years of planned withdrawals to avoid selling investments in downturns. This sequence-of-returns protection is a common drawdown strategy.
Investment risk
Unlike annuities, drawdown pots can fall in value. Sequence-of-returns risk hurts if markets drop early in retirement — diversification and sensible withdrawal rates matter.
Pension Wise offers free appointments to compare drawdown with guaranteed annuity income. You can book online or by phone before making irreversible pension decisions.
Common questions
Can I move from drawdown back to accumulation?
Generally no — once in drawdown you cannot undo crystallisation, though you can stop taking income.
Is drawdown right for everyone?
People needing guaranteed income or worried about investment risk may prefer annuities or a mix of both.
What happens on death?
Beneficiaries can often inherit drawdown funds or take lump sums — tax depends on your age at death and their tax position.