What is pension drawdown & how does it work?

Pension drawdown is when you leave your money in your pension pot and take regular income or lump sums from it as and when you want. Also known as income drawdown, flexible retirement income or flexi-access drawdown, any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. A quarter (25%) of your pension pot can usually be taken tax-free and any other withdrawals will be taxed as earnings whether you take them as regular income or as lump sums. The more money you take out each time, the less money is left to provide future income. You may need to move into a new pension plan to do this. It’s worth keeping in mind that you do not need to take an income.

Drawdown allows you to leave your money in your pension pot and take regular income or lump sums from it as and when you want. It is often referred to as income drawdown. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too.

Find out more about pension drawdown or how it works.

Money cannot normally be withdrawn from a pension until the age of 55 (57 from 2028). However, once you reach 55 (57 from 2028), you’ll usually be able to access your pension and start taking an income from it as and when you want.

You can leave your money in your pension pot and withdraw as much or as little as you want and when you need, until your money runs out or you choose another option. The more money you take out each time the less money is left to provide future income.

Find out more about how much you can take from a pension.

You can leave your money in your pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option. You can decide when and how much to take out, including taking the whole pension as a lump sum. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too.

Each time you take a lump sum, normally a quarter (25%) of it is tax-free and the rest will be taxed as earnings. The more money you take out each time the less money is left to provide future income. This option is available in the Fidelity SIPP but if your pension is with another provider you may need to move into a new pension plan to do this.

Yes, both you, your employer or anybody else can continue saving into your pension pot.

However, once you have taken taxable money out of your pension pot using pension freedoms (i.e. more than the tax-free part), the amount you can pay in and receive tax relief on (your annual allowance) may be reduced. This is known as the Money Purchase Annual Allowance (MPAA).

You may also face restrictions on carrying forward unused allowances from previous years.

Any contributions you make after the age of 75 aren't eligible for tax relief.

How long your pension income will last will depend on how much you've saved over the course of your life, how much you withdraw each time you take income, how your investments perform over time and how long you need the money for (which could be 20 years or more).

You can find out more about  how long you may need your pension to last or explore our retirement calculators to see how much you may need.

Our pension drawdown calculator can help you understand how much income you could take and how long your pension might last if you opt for a flexible retirement income (drawdown).