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How does pension drawdown work?

From the age of 55, depending on your pension provider, you should be able to take up to an initial 25% of your pension pot tax-free. Many people love the flexibility of taking their money when they need it, but how does pension drawdown work?

You can take your pension at any time over the age of 55. Still, careful consideration needs to be taken to ensure you don’t run out of money early. Taking an initial 25% tax-free could be a good idea to pay off any debts like credit cards, mortgages or car loans to help you become debt-free when you retire. With drawdown, you can make single or set-up regular withdrawals as and when you like, of course, providing you still have money invested.

The rest of your funds will remain invested, so have the potential to grow, but also the potential to lose money in a market crash.

With drawdown, it’s advisable to speak with a Hilltop Finance retirement planning expert who can put together a robust plan on how to take your money and help alleviate the chances of running out of funds.

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Things to think about…

You need to carefully plan how much income you can afford to take if you’re thinking of taking your money flexibly otherwise you could risk running out of money. This could happen:

  • You live longer than you’ve planned for. The average UK male lives to 79 years and female to 82 years according to the Office of National Statistics
  • You take out more money in the early years than you’d planned for
  • Your investments haven’t performed as well as you’d hoped
  • You have unexpected health issues and bills

It can be difficult and complex to prepare for your retirement. Still, our advisers can help using their expertise and knowledge. Once you retire, our advice doesn’t need to stop. We can continue to monitor your pension funds and make sure they are in the most suitable place for you.

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Complete our short form or call 0161 413 7051. Our team will then discuss your enquiry to get a better understanding of your situation.

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We have the answers.

Have a look over our frequently asked questions, and if you can’t find what you’re looking for simply get in touch with our friendly team who are here to answer any questions you might have.

When can you drawdown your pension?

You can drawdown from a personal pension from your 55th birthday. In some circumstances i.e. ill health, your pension provider may allow you to take money from your pension, but this is at their discretion.

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Is Pension Drawdown classed as income?

Yes, any income taken from your retirement fund will be classed as income. The first 25% of the value of your pension fund is classed as tax-free, any further withdrawals would be subject to income tax.

Tax treatment depends on the individual circumstances of each client and maybe subject to change in future.

Is Pension Drawdown Taxable?

Withdrawals up to the first 25% of your pension fund value is tax-free, this could be in one lump sum. Any further withdrawals would be subject to income tax, the same as your regular salary income.

Tax treatment depends on the individual circumstances of each client and may be subject to change in future.

How much can I drawdown?

You can withdraw the total amount that is held in your personal pension from your 55th birthday, subject to any restrictions from your pension provider. But, always remember that these funds could be your only source of income in later life.

Do all private pensions offer pension drawdown?

No, not all pensions offer the flexibility of pension drawdown, and it’s always advisable to speak with a financial adviser to find out if your policy offers flexible drawdown.

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