![]() ![]() Another issue with annuities is that annuity rates have been very low for some time, meaning it’s taking an ever-larger pension pot to buy a similar income to those that would have been possible in years gone by.Īnnuities were previously a compulsory purchase if you had a pension pot / pension income of less than a certain figure to minimise the risk of those with smaller pension pots or retirement incomes using up all of their retirement savings too quickly and having nothing left to live on in retirement. Prior to April 2015, most people were forced to take their pension via an annuity which, while providing a fixed, guaranteed income for life, had the downside of providing very little flexibility. Once all or part of your pension pot is in drawdown, you can choose how and when to take a retirement income from the drawdown fund. Alternatively, you can opt to move your pension to drawdown gradually, in which case 25% of each sum you move to drawdown will be tax-free. In which case, 25% of the entire pension pot can be withdrawn as tax-free cash. You can take the 25% tax-free cash in one go if you decide to designate your whole pension to drawdown. You’re typically entitled to take up to 25% of your pension pot upfront as a tax-free lump sum, known in the jargon as a pension commencement lump sum (PCLS). You’re free to create your own programme of lump sum payments or invest the pension to generate an income to live off and draw that, or take a mixture of these two approaches. Everyone now has access to drawdown and the full range of associated flexibilities that come with it if they want to make use of it. The 2015 pension freedoms introduced fully flexible drawdown - known from 2015 as flexi-access drawdown to reflect its difference from what came before - to the masses. ![]() You can access your pension via drawdown from the age of 55. Pension Drawdown is a way to take your defined contribution pension flexibly at retirement while it remains invested in the markets. ![]()
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