What is flexible income (drawdown)?

Flexible income gives you an income and the flexibility to use your pension savings in a way that might suit 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 (may be subject to change).

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 guaranteed 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.

Shop around and switch providers to get the best deal. If you don’t, you could miss out on a higher income in retirement.

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

Your money is still invested and charges continue to be deducted. The value of your investment can go down as well as up, and you may get back less than what was paid in or not have enough to sustain your required income.

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 guaranteed 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 guaranteed 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 guaranteed 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.

What is fixed income?

Take cash from your pension

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

How do I take cash from my pension?

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. However, your money remains invested and charges are still deducted. You could get back less than you leave in.

Read how you could

Here are some of the advantages of a flexible income:

Stay flexible – You’ll be in control so you can keep your options open. You could take a flexible income and still have the freedom to dip in to your savings anytime from age 55 (may be subject to change) or take an income that can adapt to life’s changes.

You could retire earlier by using this pot to bridge the gap before other pensions kick in. Or boost retirement income in early years whilst you’re younger.

Support family – When you die, any pot which remains can be passed on. Who receives it is at the discretion of Standard Life. You can let us know who you would like it to be paid to by completing an expression of wish form. Your wishes will be taken into account, but they will not be binding. As the payment is a discretionary one, it is normally paid free of inheritance tax.

  • If you die before age 75, this will normally be free of income tax.
  • If you die after age 75, payments out will be after income tax at the beneficiary’s marginal rate.

Stay invested – Your remaining pot will stay invested and you could benefit from potential future tax-efficient growth. This isn’t guaranteed.

Take a tax-free amount – The first 25% is normally tax-free. The rest is taxed as income. Tax rules can change in the future.

This is general information from Standard Life about the flexible retirement options available. You may need to transfer to another product to access some of these options, which may mean you need to rejoin the scheme to receive any further pension payments from your employer.

Shop around - Whether you’re thinking about flexible or guaranteed income – take time to shop around for the best deal. You could transfer your pension to another provider and you might get a better retirement income.

No guarantees – You run the risk of investments performing poorly. You could run out of money if you withdraw too much or you live longer than expected. Remember your income stops when your money runs out so you need to consider the longer-term impact of making withdrawals from your pot because you could run out of money before you die.

Hands-on – You’ll need to regularly review and actively manage your income and investments. You may need financial advice.

Payments into any pension could be restricted – Under Government rules, when you start taking flexible income withdrawals, this will restrict the future payments you or an employer can make to any of your money purchase pensions without potential tax consequences. Your annual allowance becomes £4,000 in total across all money purchase arrangements. This pension plan is an example of a money purchase arrangement. This restriction will not apply if you are only accessing your tax free cash entitlement. This can be a problem if you’re still earning and either have other savings you want to pay into a pension or if you intend to make significant payments into any money purchase pensions. Your pension provider or trustee will tell you if this applies to you when you take your pension benefits.

Investment risk – Remember flexible income gives you investment control and poor investment performance can lead to a reduction in the amount of income that you can take or you can lose it entirely.

Tax bands – Once you go over your tax-free cash limit you’ll pay income tax on the rest. This income is added to any other income you receive in that tax year and could take you into a higher rate tax band.

State benefits – Your entitlement to means-tested state benefits, if applicable, may be affected if you take cash or income from your pension – check this isn’t going to be a problem before going ahead.

If you’re unsure about taking on these risks then flexible income may not be the best option for you. You could consider a guaranteed income for life instead.

Find out what your income could be

Your financial decisions at retirement will have an impact on the rest of your life so make sure you consider your options carefully. Not all providers offer flexible income solutions. You may need to move product or provider so make sure you shop around.

Here are the key things you should look for if you choose flexible income:

Review your pension provider

Make sure you can take your income out whenever you like. Some providers only let you make withdrawals once a month.

Consider your investment choice

Make sure your provider offers appropriate investments for flexible income to give your pension pot the best opportunity of lasting as long as you need it to.

If you’re not comfortable choosing your own investments you could think about taking a guaranteed income instead.

Seek guidance

You’ll need to be more hands-on with your money in retirement. Make sure your provider offers the help you need, unless you already have an adviser. It’s a good idea to seek appropriate guidance or advice to understand your options at retirement. You will have access to the Government’s free Pension Wise service provided through Citizen’s Advice or The Pensions Advisory Service. This guidance can be accessed on the internet, by telephone or face to face. Their contact details can be found on the Contact us pages in the links provided.

Check your charges

You need to understand the charges which will be applied to your fund. Make sure your provider explains these to you in detail so that you get the best value for your money.

To sum up

Tax-free cash

The first 25% you take as cash is normally tax-free.


Dip in to your savings anytime from age 55 (may be subject to change) 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.

Support family

Pass on your remaining pot normally inheritance tax-free when you die.

Stay invested

You could benefit from potential future, tax-efficient growth.

No guarantees

If you choose to keep your money invested and take a flexible income, you need to remember that your investments may not perform as well as you expect them to – they can go down as well as up in value. You could also run out of money if you withdraw too much or if you live longer than expected.

Payments into any pension could be restricted

Once you go over your tax-free cash limit this normally restricts the payments you or an employer can make to any of your money purchase arrangements without potential tax consequences.

Need to be hands-on

You’ll need to regularly review and actively manage your income and investments. You may need financial advice.

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 2021. Your own circumstances including where you live in the UK 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.

Are you approaching retirement?

Access to impartial guidance

We recommend you seek appropriate guidance or advice to understand your options at retirement. If you are aged 50 or over, you can get free guidance over the phone or face to face with Pension Wise, a service from MoneyHelper.

Go to www.moneyhelper.org.uk/pensionwise or call 0800 138 3944.

MoneyHelper guides are also available at www.moneyhelper.org.uk

Retirement pathfinder tool

A quick and easy way to give you a snapshot of your options.

Protect against pension scams

The Pension Regulator (TPR) and the Financial Conduct Authority (FCA) have provided information to help people protect themselves from pension scammers.