Drawdown allows you to take money from your pension while keeping your remaining pension invested. You can choose how much you take and when you take it.
Unlike an annuity, drawdown does not provide a guaranteed income for life. The amount of money available in your pension will depend on factors such as how much you withdraw, how your investments perform and how long you remain in drawdown.
You do not have to take your full 25% tax-free amount at once. You can take your tax-free cash gradually. For example, if you have a £100,000 pension and move £10,000 into drawdown, £2,500 could be paid as tax-free cash, while the remaining £7,500 stays invested. Any money you take from your drawdown pot may be subject to Income Tax.
Money remaining in your pension can usually be passed on to your beneficiaries when you die, subject to the applicable rules and your individual circumstances.
You can also use drawdown alongside other retirement income options, such as an annuity. An annuity can provide a guaranteed income for life, while drawdown gives more flexibility to withdraw money as it's needed.
If you’re unsure about your options or whether drawdown may be the best option for you, we recommend seeking advice from an independent financial adviser. You can also get free impartial guidance from the Government-backed guidance service, Pension Wise.