Pension Drawdown

What Martin Lewis Says About Annuity or Drawdown

Martin Lewis and MoneySavingExpert on annuity or drawdown: the jam-and-sponge tax point, mixing options, and free Pension Wise guidance. Reviewed September 2026.

By Phil Handley, DipPFS 11 min read

People searching for Martin Lewis on annuity or drawdown are usually trying to answer one question: should I swap my pension for a guaranteed income, keep it invested, or mix the two? This page sets out what Martin Lewis and MoneySavingExpert (MSE) actually publish on that choice, dated to the sources we checked. It is general information, not personal financial advice, and it does not tell you which option to take.

Reviewed 14 September 2026. Martin Lewis is a consumer journalist, not a regulated financial adviser. MSE guides explain options. They do not recommend a product for you.

The current MSE taking-your-pension guide (updated 14 August 2025) treats drawdown and an annuity as two of several ways to take a defined contribution pot, not as a single “right” answer. It also stresses free Pension Wise guidance before you act. The detailed comparison of charges, death benefits and the money purchase annual allowance sits on our drawdown or annuity comparison.

In brief

  • Annuity or drawdown is not one-size-fits-all. MSE sets them out side by side: drawdown stays invested and can run out; an annuity pays a set income that does not depend on markets.
  • How you take the 25% tax-free cash changes the tax bill. MSE uses a jam-and-sponge (jam roll) analogy. Taking slices keeps jam and sponge together in each withdrawal. Taking the jam first, then moving the sponge into drawdown or an annuity, splits the tax-free cash from later taxable income.
  • You can mix the options. MSE says you can take cash, buy an annuity and use drawdown at different times after the minimum pension age, subject to what your scheme allows.
  • Start with free guidance. MSE points people aged 50 or over with a UK defined contribution pot to Pension Wise from MoneyHelper.

Related guides on this site

What MoneySavingExpert says about annuity or drawdown

The MSE guide How should I take my pension? (updated 14 August 2025) is the main public page that sits behind searches such as “annuity or drawdown Martin Lewis”. It covers defined contribution (money purchase) pensions. It does not apply to defined benefit “salary scheme” pensions or the State Pension in the same way.

On drawdown, MSE describes it as an investment product. You can usually take up to 25% tax-free in one go and move the rest into drawdown, then take taxable income as a regular amount, in lumps, or not at all. The pot can grow or shrink. MSE says you should be comfortable checking how it is performing later in life, and that it is possible to run out of money if withdrawals and investment returns do not last.

On annuities, MSE says you can take the same tax-free cash and use the rest to buy a regular guaranteed income. That income is taxed like other income. The strength it highlights is security: an annuity cannot “run out” if you live a long time. The trade-off it flags is flexibility. Once set up, the income is generally fixed, and you cannot usually pass an annuity on unless you chose a joint-life or guarantee-period option. MSE also tells readers to shop around rather than take the first quote, and to ask about enhanced rates if they smoke or have health issues.

MSE’s own side-by-side table makes the same split we use on the comparison page: drawdown is flexible and market-dependent; an annuity is fixed and does not need ongoing investment decisions. Which side of that trade suits someone depends on health, other income, whether they have a partner, and how they feel about investment risk. No website, including this one, can answer that for you.

The jam-and-sponge tax point (dated)

The tax point most often linked to Martin Lewis is not “drawdown is always better”. It is that the method of taking money changes when the taxable 75% hits your income.

On the 10 February 2021 Martin Lewis Money Show, MSE reported the same idea as a “tax trap” that could cost “£10,000s”, using a Swiss roll (jam and sponge) analogy. The current MSE guide still uses that picture, now as a “jam roll”:

  • Slices (uncrystallised funds pension lump sums, or UFPLS). Each withdrawal is typically 25% tax-free and 75% taxable in the year you take it. A large slice, added to other income, can push you into a higher tax band.
  • Take the jam first. You take the full 25% tax-free lump sum. The remaining “sponge” moves into drawdown or is used to buy an annuity. You then pay tax on that sponge only when you withdraw income from it later.

MSE’s point, in the 2021 write-up and the 2025 guide, is timing. If you expect to be a lower-rate taxpayer later, splitting the tax-free cash from later taxable income can mean less tax on the sponge. That is a general illustration, not a recommendation to take tax-free cash now.

The lifetime cap on tax-free cash for most people is the lump sum allowance of £268,275. That figure is set out on GOV.UK and is also stated in the MSE guide. Protected allowances can be higher. Tax treatment depends on your circumstances and can change.

Mixing annuity and drawdown

MSE lists five main options, including mixing them. Its worked example uses a £100,000 pot: take 25% as tax-free cash, use part of the rest for an annuity, and put the remainder into drawdown. We are not repeating the income figure from that example here, because annuity rates move and a 2025 illustration can date quickly. The structure is what matters. You do not have to pick only drawdown or only an annuity.

MSE also says you do not have to combine on day one. You could take tax-free cash, move the rest into drawdown, and buy an annuity later if you want more certainty, if the provider allows it. Our hybrid approach guide and the pension drawdown calculator are the next steps on this site if you want to see how a mix can look in numbers. Those tools are illustrations, not advice.

What MSE says to do before you decide

The MSE guide tells readers they do not have to make the decision alone. For people aged 50 or over with a UK defined contribution pot (or who have inherited a pot, or can take a pension early through ill health), it points to Pension Wise from MoneyHelper: free, impartial, government-backed guidance. You can start online at your own pace or book a telephone appointment of about an hour, then receive a summary of options and next steps.

Under 50, MSE says a standard Pension Wise appointment is not usually available, but MoneyHelper still offers guidance through its site, chat, and the pensions helpline published on that site. Check MoneyHelper for the current number before you call.

MSE is explicit that this is guidance, not regulated advice. It will not pick a product or build a detailed plan. For complicated arrangements or larger pots it says paid independent financial advice is often worth considering. That is also where this site stops. Compare Drawdown helps you compare drawdown providers and fees and charges. It does not tell you to buy an annuity or to enter drawdown.

Rules that sit behind the MSE guide (2026/27)

These figures are from GOV.UK and MoneyHelper, checked for the 2026/27 tax year. They are the mechanics MSE is describing, not extra Martin Lewis claims.

  • Minimum pension age. Most defined contribution pots can be accessed from 55. MSE and MoneyHelper both state that this rises to 57 from 6 April 2028 for most people.
  • Tax-free cash. Usually up to 25% of the pot, subject to the £268,275 lump sum allowance for most people.
  • Taxable income. Drawdown income and annuity income count as income for the tax year. The personal allowance is £12,570 for most people (Scotland uses different bands above that).
  • Money purchase annual allowance (MPAA). Once you take taxable income from a money purchase pension, the amount you can pay in each year usually falls to £10,000. Taking only tax-free cash does not, by itself, trigger the MPAA. The standard annual allowance remains £60,000, or your relevant UK earnings if lower, until the MPAA applies. MSE notes a limited exception for up to three personal pots of £10,000 or less taken in full.
  • Emergency tax. A first withdrawal is often taxed on an emergency “Month 1” basis. HMRC can repay the extra. See our emergency tax guide and the GOV.UK reclaim pages. We are not attributing a specific “scandal” quote to Martin Lewis here, because we have not verified a dated primary clip for that wording.

If you are still working and contributing, MSE’s own warning is that taking taxable income can shrink how much you can pay in afterwards. Leaving the pot invested until you need it is one of the options the guide lists.

What this page is not saying

This page does not say Martin Lewis tells everyone to use drawdown, or everyone to buy an annuity. The MSE material we checked says the opposite: the better route depends on your situation, and you should get guidance before you act. Annuity rates have improved in recent years compared with the post-2015 lows, which is why MSE now treats an annuity as a live option again. That is a market observation, not a reason to buy one today.

We have not invented dialogue for Martin Lewis. Where we describe the jam-and-sponge point, it is paraphrased from the 10 February 2021 MSE news piece and the 14 August 2025 MSE guide. Where we describe drawdown versus annuity, it is paraphrased from that same guide. If a clip or article is not in the source list below, we have not relied on it.

Sources

Factual claims on this page were checked against the following on 14 September 2026:

Important: This article is information about published consumer guidance and the pension rules behind it. It is not financial advice and it is not a recommendation of drawdown, an annuity, or any provider. Pension decisions can be hard to reverse. An annuity purchase generally cannot be undone, and taking taxable income can trigger the money purchase annual allowance. If you are 50 or over, start with Pension Wise. For a recommendation that applies to you, speak to a qualified financial adviser. Tax depends on individual circumstances and may change. Compare Drawdown is operated by Arthur Browns Wealth Management Ltd (FCA No. 825843).

Important: This article is for informational purposes only and does not constitute financial advice. Pension rules are complex and individual circumstances vary. Always seek guidance from a qualified financial adviser before making pension decisions.

Last updated: 26 November 2024. Compare Drawdown is an independent pension drawdown comparison service.