3/1/2024 0 Comments Income drawdown![]() It can be tricky working out how much to withdraw, especially when you don’t know how your investments will perform, or how long you’ll live. This is where each withdrawal is 25% tax-free. One option is to take your tax-free cash as a lump sum - this is known as a pension commencement lump sum (PCLS) - before taking withdrawals that are subject to tax.Īnother option is to take uncrystallised funds pension lump sums (known as UFPLS). Depending on the type of drawdown scheme you choose, there are several ways to do this. You can usually take 25% of your pension tax-free (the rest is liable for income tax). Withdraw lump sums as and when you like.Once you’ve transferred your pension into drawdown, you can choose to: Sticking with your pension provider may be easier but switching to a different pension company or an online investment supermarket could save you money, offer more flexibility and provide more investment choice. However, just like buying travel insurance or choosing an energy supplier, it’s important to compare different drawdown services, so make sure you also shop around. Your pension provider may offer a drawdown service, so speak to them about your options. If you have a defined benefit scheme, such as a final salary pension, you won’t be able to use drawdown - unless you transfer it to a SIPP first. Note that drawdown is only possible if you have a defined contribution pension such as a modern workplace scheme or self-invested personal pension (SIPP). There is a risk your investments will fall in value, or you withdraw too much cash - or both - and you run out of money during retirement. However, there is no guarantee this will happen. Ideally, your investments will do well, your pension will get bigger and it will last the rest of your life. You leave the rest of your pension savings invested - and choose how they are invested - and either set up regular withdrawals, or take out money ad-hoc. ![]() Annuity or drawdown: What is pension drawdown?ĭrawdown allows you to take out as much money as you like, as often as you like.
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