The Role Of A Financial Adviser In Pension Drawdown

Pension drawdown enables you to withdraw your pension savings as and when you need funds. In this article, we’ll look at why the process can be complex, and why it’s a good idea to seek professional advice before you get started.

An experienced financial adviser can provide tailored advice and guidance to help you decide whether pension drawdown is the best option for you. Read this in-depth guide from Hilltop to find out more.

What Is Pension Drawdown, And How Does It Work?

Pension drawdown is a flexible pension arrangement allowing you to withdraw funds from a defined contribution pension as you need it. The remainder of the pension remains invested allowing your funds to potentially grow throughout retirement.

Pension drawdown is available to pension savers aged 55 and over. You can even buy an annuity with a portion of your pension to give you a regular income and keep the rest in drawdown for the best of both worlds.

You should only consider pension drawdown if you are comfortable leaving your money invested in the stock market to give it the best chance of growing – remembering that market fluctuations can mean that your investments can go down as well as up.

There is always a chance that you could be left with less money to draw down as an income than you originally banked on, so pension drawdown does come with some inherent risks to consider.

Do You Need A Financial Adviser For Pension Drawdown?

While you don’t have to use a financial adviser to enter a pension drawdown arrangement, it can be financially beneficial to do so. A pension fund can be one of your largest investments, so it could make sense to speak with an expert before making any decisions that could have a huge impact on your future.

A regulated financial adviser provides invaluable advice, guidance and support regarding pension drawdown planning and management.

They can help you understand the pension drawdown process and explain the various options and alternatives available to you – providing tailored advice around your goals and objectives, so you can maximise your pension drawdown options and avoid costly errors.

When considering pension drawdown, it is important to consider tax implications and investment choices. A financial adviser can outline how pension drawdown may affect your tax liabilities and suggest suitable investment options for your pension pot.

Believe it or not, some older pension schemes do not have the technology to enable pension drawdown. In this case, a financial adviser can advise about a pension transfer. They will evaluate whether a transfer is in your best interests and, if so, offer viable options before setting the transfer in motion.

Many people start to access their drawdown funds before retirement, without considering the implications to their remaining pension pot. Research by Zurich found that 44% of surveyed Brits who had accessed drawdown funds had no plans to actively manage their remaining pension, exposing them to the risk of a shortfall in later life.

What Qualifications Should I Look For When Choosing A Pension Adviser?

When choosing a financial adviser to help with pension drawdown, make sure that they are qualified and experienced in this specific area. The Financial Conduct Authority (FCA) regulates all financial advisers in the UK, and your potential adviser should be authorised or licensed to provide pension advice.

In addition, pension advisers offering recommendations on retirement products must hold a Level 4 Diploma (the equivalent of the first year of a degree).

Alongside qualifications and experience, always check out any reviews that previous clients have left for the firm, to ensure you are working with a reputable business.

What Types Of Services Can I Expect To Receive From A Pension Adviser?

A financial adviser with experience in pension drawdown can provide various services, including helping you to understand the pension drawdown process and tax implications, suggesting suitable pension investments, providing advice on pension income options, and helping to manage your pension pot. They can also provide pension transfer advice if you are considering transferring to another provider.

A pension adviser can also work with you to ensure that your pension is managed in the most tax-efficient way, including giving advice on minimising the tax you must pay. This can help to maximise your pension income and ensure that your pension pot is working hard for you in retirement.

Financial advisors should understand your goals and objectives and provide pension advice that is tailored to your individual needs.

It’s really important to keep them updated on any changes in your circumstances, so that they can provide the best pension advice and solutions for your current goals and outlook – ensuring that your pension remains well-managed and invested.

How Can I Evaluate The Costs Of Working With A Financial Adviser?

While there will be some initial costs in terms of advice and implementation fees, using a professional independent financial adviser to help set up your pension drawdown can save you time and money in the long run.

Here are five key benefits of working with a financial adviser when considering pension drawdown:

1. Regulated Advice And Protection

Independent Financial advisers (IFA) are governed by the strict standards set by the FCA. So if an adviser gives you ‘bad’ advice about a pension drawdown arrangement, the Financial Ombudsman can investigate on your behalf and provide compensation if they find that you have been mis-advised.

2. Impartial, Unbiased Advice

IFAs are trained to be detached and unemotional about financial decisions. Because self-investors can be prone to biases that can lead to risky behaviour, having an experienced financial adviser onside can help you consider your pension drawdown options with greater logic, clarity and a long-term perspective.

3. Industry Data And Bargaining Power

Independent financial advisers have broad access to industry data and specialists – so they can offer a balanced, data-driven approach to decision-making. They also have more bargaining power to secure the most favourable pension drawdown options, as opposed to going it alone and taking your chances with the market.

4. Provide Clarity Over Your Goals

The role of a financial adviser goes well beyond recommending and setting up pension drawdown products. A good financial adviser will help you focus on your goals, considering the things that are most important to you.

Although you may think you know what you want from your pension and retirement, financial advice can help you to gain crystal clear clarity over your short, medium and long-term objectives.

5. Makes You Better Off

There are countless studies out there that demonstrate that financial advice can make you better off.  A study by the International Longevity Centre (ILC) and Royal London had found that people who took financial advice were nearly £50,000 better off than those who didn’t over a decade.

It wasn’t just the most affluent who gained the most, either. Those who defined themselves as ‘just getting by’ actually enjoyed the biggest benefits, with their pension pot boosted by 24% (£35,054) over a ten-year period.

Get Regulated Pension Drawdown Advice From Hilltop

If you’ve been asking yourself: ‘Do I need a financial adviser for my pension?’, the answer is: you don’t NEED one, but speaking with an IFA could provide you with knowledge and understanding about your pensions.

You’ll likely be better off in the long run, and you will have peace of mind that your future financial security is in safe hands. When making pension drawdown decisions, it is particularly important to seek professional financial advice. Although not compulsory in many cases, financial advice can provide peace of mind that you are making the right decisions.

A qualified and experienced financial adviser can provide pension advice tailored to your individual needs, goals and situation. Their advice can help you to make the most of pension drawdown, ensuring you can enjoy the fruits of your labour in a sustainable, tax-efficient way.

Of course, it is important to consider the costs associated with working with a financial adviser, but the benefits often outweigh the costs in the long run.

Why Choose Hilltop? 

Pension planning is a long-term process, so the pension advice you receive should be regularly reviewed to ensure it remains suitable for your current goals and needs.

Not only can Hilltop’s experienced advisers provide regular pension reviews to assess your ongoing financial outlook, but they can also help to adjust your pension investments to help maximise the pension income you can draw down in the future.

If you would like advice about pension drawdown or to arrange a consultation, please contact us on our website or call us on 0161 413 7051. Our experts will be only too happy to discuss your pension income options with you.

Hilltop is open 9am to 5pm Monday to Thursday and 9am to 4pm on Fridays. Hilltop Financial Planning is authorised and regulated by the Financial Conduct Authority. Our advisers have over 100 years of combined experience and knowledge of working with people like you and helping them to make the most of their finances.

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