What is Flexi-Access Drawdown?
You can choose to take up to 25% (a quarter) of your pension pot as a tax-free lump sum. You then move the rest into one or more funds that allow you to take a taxable income at times to suit you. Typically, people use it to take a regular income.
You choose funds to invest in that match your income objectives and attitude to risk and set the income you want. The income you receive may be adjusted periodically depending on the performance of your investments.
Once you’ve taken your tax-free lump sum you can start taking the income right away or wait until a later date.
You can also move your pension pot gradually into income drawdown. You can take up to a quarter of each amount you move from your pot tax-free and place the rest into income drawdown.
Using Drawdown Funds for Other Products
To help provide more certainty, you can at any time use all or part of the funds in your income drawdown to buy an annuity or other type of retirement income product that may offer guarantees about growth and/or income. What’s available in the market will vary at any given time so you’ll need to discuss your options with a financial adviser.
If You Are Already Using Flexible Drawdown
Existing Flexible Drawdown funds will be renamed 'Flexi-Access' Drawdown. Like Flexible Drawdown, Flexi-Access gives you the freedom to take income from your pension savings without a cap or limit. This could be all at once, as one-off small amounts, or as regular withdrawals.
The tax implications are the same as for Flexible Drawdown. In other words, once you have taken the tax-free cash amount (typically 25%), the rest of the money you take is subject to income tax in the same way as any other income; the more you receive, the higher the tax.
If you are aged under 75, you will be able to pay up to £4,000 a year into money purchase pensions, an option that has not been available to you since you started using Flexible Drawdown.
The value of investments and income from them may go down. You may not get back the original amount invested.
A pension is a long term investment. The fund value may fluctuate and can go down. Your eventual income may depend on the size of the fund at retirement, future interest rates and tax legislation.
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.