Ask the Pension Professor | Pension Drawdown Company

Ask the Pension Professor

Ask the Pension Professor

What is Pension Drawdown?

A Pension Drawdown plan allows you to unlock the tax-free cash from your pension plans without taking out an annuity. You retain ownership of the funds and the funds continue to be invested. From April 2015 Flexi-Access Drawdown replaced Capped Drawdown and Flexible Drawdown.

What age can I enter into Pension Drawdown?

You can currently enter into Pension Drawdown from age 55.

Can I take a lump sum at the beginning of Pension Drawdown?

Yes, you can take up to 25% tax-free cash from your total pension pot.

Can I merge multiple pension plans into my Pension Drawdown plan?

Yes, you can transfer any number of pension plans (personal and occupational) to one single income drawdown plan

What happens when I die?

If you die before age 75 your beneficiaries can inherit your whole pension fund tax-free. If you die after age 75 your beneficiaries will pay tax at their marginal rate when they decide to access the pension fund.

How do I calculate my Pension Drawdown?

You can calculate your Pension Drawdown yourself using our online Pension Drawdown Calculator here

Please note you should always seek financial advice before acting on any calculation conducted by yourself

Do I have to take a lump sum at the beginning of Pension Drawdown?

No, you don't have to take any money from your original fund. You can, however, take anything from 0% - 25% of your starting sum.

Can benefits be transferred between pension schemes?

Yes, if it's a 'recognised transfer', it will be an authorised member payment with no adverse tax consequences.

I am entitled to more than 25% tax-free cash in my current scheme. I want to go into drawdown, which my scheme doesn't provide. Can I take higher tax-free cash from my current scheme and take drawdown from another scheme via an Open Market Option?

No, the Open Market Option (OMO) only applies where someone buys an annuity from their current scheme and the annuity is actually bought on the open market to take advantage of better annuity rates available from another provider. An OMO can't be used to provide a different kind of benefit (i.e. drawdown).

If you have an entitlement to more than 25% tax-free cash but no access to drawdown from your current pension scheme, the only way you can access drawdown is to transfer, before taking benefits, to a pension scheme that provides it.

For the higher tax-free cash entitlement to survive the transfer, the transfer will have to be a block transfer or a wind-up transfer

Can I access my pension funds before 55?

Normally a member can only take money from their pension once they're aged 55 or over. Some companies are marketing schemes claiming to let members gain early access to their pension pot by borrowing from the member's pension fund before they retire. This is commonly known as 'pension liberation' and can result in unauthorised payments being made from the pension scheme. Early access to pensions is rarely in anyone's long-term financial interests, and can carry tax charges of more than half the unauthorised payment.

The Pensions Regulator, HM Revenue & Customs and Action Fraud are working together to combat such schemes and, following warnings last year about the dangers of entering into them, have joined forces to publish a set of leaflets about pension liberation offers that are being marketed.


THE VALUE OF INVESTMENTS AND INCOME FROM THEM MAY GO DOWN. YOU MAY NOT GET BACK THE ORIGINAL AMOUNT INVESTED.

INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS. ANY LEVELS AND BASES OF, AND RELIEFS FROM TAXATION, ARE SUBJECT TO CHANGE.