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.
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 | 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, up to a maximum of £268,275. 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.
Get professional advice. If you have a pension pot over £30,000, it's worth speaking to a financial adviser. Drawdown is a complex decision with tax implications and investment risks. An adviser can help you create a sustainable withdrawal strategy.
You can start drawdown from age 55 (rising to 57 in 2028). This is the minimum pension age in the UK unless you have a protected lower retirement age.
You can withdraw as much or as little as you want, whenever you want. However, taking large withdrawals could push you into a higher tax bracket, deplete your pot too quickly, or trigger the Money Purchase Annual Allowance. A safe withdrawal rate is typically 3–4% per year to make your pension last 25–30 years.
Your remaining pension pot can be passed to your beneficiaries. If you die before age 75, it passes tax-free. If you die after age 75, it's taxed at the beneficiary's income tax rate. Unlike annuities, your pension doesn't stop when you die (unless you've spent it all).
Yes, you can transfer your drawdown pension to a different provider if you find better fees or features. Most providers don't charge exit fees anymore, but always check before transferring. The process typically takes 4–6 weeks.
Investment pathways are ready-made investment options that drawdown providers must offer by law. They're designed for people who don't want advice but need help choosing investments. 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, (4) I plan to take out all my money within the next 5 years.
While not legally required, financial advice is strongly recommended if your pension pot is over £30,000, you have complex financial circumstances, you're unsure about investment choices, or you want help creating a sustainable withdrawal strategy. For pots over £30,000, the cost of advice (typically £1,500–£3,000) is often worth it to avoid costly mistakes.