Everything you need to know about pension drawdown — how it works, who it's for, and whether it's the right choice for your retirement.
Last updated 24 September 2026
Capital at risk. The value of investments can fall as well as rise. You may get back less than you invest.
Pension drawdown (also called income drawdown or flexi-access drawdown) is a way to access your pension savings from age 55 (rising to 57 in 2028) while keeping your money invested.
Instead of buying an annuity that pays a fixed income for life, drawdown lets you:
| Feature | Pension Drawdown | Annuity |
|---|---|---|
| Income | Flexible — adjust anytime | Fixed for life |
| Investment | Stays invested — can grow | Exchanged for guaranteed income |
| Risk | Market risk — value can fall | No investment risk |
| Inheritance | Can pass on remaining pot (inheritance tax may apply from 6 April 2027) | Usually ends when you die* |
| Longevity risk | Could run out if you live long | Guaranteed for life |
| Best for | Flexibility seekers, larger pots | Certainty seekers, guaranteed income |
*Unless you choose joint life or guaranteed period options (which reduce income).
Hybrid approach: Many retirees use both — put some pension in an annuity for guaranteed income to cover essential costs, and keep the rest in drawdown for flexibility and growth potential.
25% tax-free (Pension Commencement Lump Sum). The first 25% of your pension pot is tax-free, usually up to a maximum of £268,275 under the standard lump sum allowance; a protected allowance can be higher. This is called your Pension Commencement Lump Sum (PCLS).
75% taxed as income. Any withdrawals beyond your tax-free amount are added to your other income and taxed accordingly:
Money Purchase Annual Allowance (MPAA). Once you take taxable income from your pension, your annual pension contribution limit drops from £60,000 to £10,000 per year.
The first time you take taxable money from a pension, your provider often has no current tax code for you. HMRC's rules then tell it to use the emergency tax code on a 'Month 1' basis. That treats the payment as if you will be paid the same amount every month for the rest of the tax year, so a one-off withdrawal can have much more tax taken off than you actually owe.
A P45 from the current tax year (for example from a job you have left) can help: given to the provider before the first payment, it lets the provider use that tax code instead. Some people take a small first payment so that HMRC sends the provider a tax code before a larger withdrawal. Any taxable payment from flexi-access drawdown or an uncrystallised funds pension lump sum (UFPLS), however small, triggers the money purchase annual allowance (£10,000 a year), which matters if you are still paying into a pension.
| Your situation | What to do |
|---|---|
| You took some of your pot, it is not empty, and you will not take any more this tax year | Form P55 |
| You emptied your pot and have other income, such as a job or another pension | Form P53Z |
| You emptied your pot, have stopped work and have no other income | Form P50Z |
| You are taking regular payments from the pot | Usually no form: HMRC sends the provider a corrected tax code and later payments put it right. Anything still overpaid at the end of the tax year is dealt with after 5 April. |
Source: HMRC: PAYE manual PAYE94055 (flexibly accessed pensions) and the GOV.UK guidance for each form.
Finance Act 2026 changes how pensions are treated when someone dies. If the pension holder dies before 6 April 2027, the current rules apply, even if the money is paid out after that date. For deaths on or after 6 April 2027, most unused pension funds and pension death benefits will count towards the value of the estate for inheritance tax.
GOV.UK says most estates will continue to have no inheritance tax to pay after 6 April 2027. Whether an estate does depends on its total value, the allowances that apply and who inherits.
Checked 24 September 2026. Sources: GOV.UK: Inheritance Tax on unused pension funds and death benefits; GOV.UK: Technical note, Inheritance Tax on pensions; MoneyHelper: What happens to my pension when I die?.
When advice may help. You do not have to take financial advice to use drawdown. Some situations are more complex, though:
Source for the £30,000 rule: legislation.gov.uk: Pension Schemes Act 2015, section 48.
You can start drawdown from age 55, rising to 57 from 6 April 2028. This is the normal minimum pension age in the UK unless you have a protected lower pension age.
You can withdraw as much or as little as you want, whenever you want. Large withdrawals could push you into a higher tax band, run your pot down too quickly, or trigger the money purchase annual allowance. A commonly quoted starting point is 3–4% a year; no rate is guaranteed. You can test different rates in the pension drawdown calculator.
Your remaining pot can be passed to your beneficiaries. If you die before 75 they usually pay no income tax on it; if you die at 75 or over it is taxed at their income tax rate when they take it. For deaths on or after 6 April 2027, most unused pension funds also count towards the estate for inheritance tax, although pensions left to a spouse, civil partner or charity stay exempt. Unlike most annuities, the pot does not simply stop when you die.
Yes, you can transfer your drawdown pension to a different provider. Many providers no longer charge exit fees, but always check before transferring. The process typically takes 4–6 weeks.
Investment pathways are ready-made investment options that drawdown providers must offer to people who move into drawdown without advice. The four pathways are: (1) I have no plans to touch my money in the next 5 years, (2) I plan to use my money to set up a guaranteed income (annuity) within the next 5 years, (3) I plan to start taking my money as a long-term income within the next 5 years, (4) I plan to take out all my money within the next 5 years.
No, you can set up drawdown without advice. Advice is a legal requirement in specific cases, most commonly if you want to transfer safeguarded benefits, such as a final salary pension or a guaranteed annuity rate, worth more than £30,000. If you are 50 or over, Pension Wise from MoneyHelper offers free, impartial guidance on your options.
Your provider probably used an emergency tax code on a 'Month 1' basis, which treats a one-off withdrawal as if you will receive it every month. You can reclaim the overpayment: form P55 if your pot is not empty, P53Z if you emptied it and have other income, or P50Z if you emptied it and have stopped work with no other income. If you take regular payments, HMRC usually corrects it through your tax code.