What is flexible income (drawdown)?

Flexible income or drawdown gives you an income and the flexibility to use your pension savings in a way that best suits your individual needs now and in the future.

What is flexible income?

If you’re looking for greater financial freedom in your retirement then flexible income could be the right choice for you. You’ll be able to access your pension savings at any time from the age of 55 (57 from 2028).

Flexible income offers a wide range of possibilities. We’ll help you understand your options. Here’s what you’ll be able to do:

  • Take an income – and change this any time you want
  • Dip in and take a cash withdrawal any time you like
  • Keep your pension pot invested, giving it the potential to keep on growing
  • Pass on what’s left in your pot to your loved ones, normally inheritance tax free, when you die
  • Change your mind and buy a fixed income (annuity) for life, anytime
  • Take a tax free amount – the first 25% of your pension pot is normally tax-free

To access this you may need to move to a different pension product which offers this functionality. Different charges may apply. Transferring will not be right for everyone. There are a number of points to consider, as you could be losing money by giving up any valuable benefits or guarantees that your current plan offers.

Remember that flexible income alone doesn’t provide a guaranteed income and may not be suitable for everyone.

As your pot stays invested, you’ll have to be comfortable taking the risk that if investments don’t perform well enough they might not be able to sustain the amount of income you need. You could even run out of money.

Use our Retirement pathfinder and get a snapshot of your options

How could I use flexible income?

You have the freedom to choose how you take your income.

Adapt income to suit your changing circumstances at any time.

Example: In early retirement you might be more active and want to take a greater income allowing you to do the things you enjoy. As you get older you might find you need to spend less.

If you have other sources of income you could:

Bridge the gap before another pension starts.

Example: If you have pensions elsewhere you could retire early or go part-time, taking a flexible income from your pot, before your main pension starts.

Or, you could boost your income by topping up your other retirement savings.

Example: If you have a final salary pension – you could use that income to cover the essentials and take a flexible income from your pot to help make the most of life in early retirement.

You could even blend by taking a mix of options to find the perfect solution.

Taking a flexible income and fixed income could offer a good balance of peace of mind and the flexibility to adapt to life’s changes.

Example: You could start with a flexible income then when you reach 75, you could buy a fixed income giving you a guaranteed income for the rest of your life.

Or, you might decide that taking a mixture of the two is best for you. You could use some of your pension savings to secure a fixed income to cover the essentials such as bills and living costs then use the rest to cover life’s extras.

These are just a few examples and should not be regarded as financial advice. The right option will depend on individual circumstances.


Fixed income

Fixed income, or an annuity, is a guaranteed income for life. It’s easy to set up with no fuss after that.


Take cash from your pension

Withdraw cash lump sums from your pension whenever you like. The first 25% is normally tax-free.


Why leave it for now?

You don’t have to take money out of your pension straight away. You could benefit from leaving your money where it is.

To sum up

Flexibility Dip in to your savings anytime from age 55 (57 from 2028) onwards or take an income that can adapt to life’s changes. Bridge the gap before other pensions kick in allowing you to retire earlier or boost retirement income in early years whilst you’re younger. No guarantees Investments could perform poorly and you might not have enough in your pot to sustain the level of income you need. You could even run out of money.
Support family Pass on your remaining pot normally inheritance tax-free when you die. Need to be hands-on You’ll need to regularly review and actively manage your income and investments. You may need financial advice.
Stay invested You could benefit from potential future, tax-efficient growth.    

Tax rules and legislation can change. Any information given is based on our understanding of law and current HM Revenue & Customs practice, as at April 2017. Your personal circumstances also have an impact on tax treatment.

The information provided here should not be regarded as financial advice. If you are unsure you should speak to a financial adviser. There’s likely to be a cost for this. Remember, the value of your investment can go up or down and may be worth less than what was paid in.

 Are you approaching retirement?

We recommend you seek appropriate guidance or advice to understand your options at retirement. If you don’t already have an adviser, we’re here to help. You will have access to the Government’s free impartial guidance service – Pension Wise – provided through Citizens Advice or The Pensions Advisory Service. Their contact details can be found on the Contact us pages in the links provided. This guidance can be accessed on the internet, by telephone or face to face.