Flexi-access drawdown is the means by which you, at age 55 or over, can choose to delay the purchase of an annuity and draw your income directly from pension savings.

A flexi-access drawdown gives you control over how and when you access your benefits. As up to 25% of the accumulated pension fund is available as a tax-free lump sum, this can either be drawn in one go, or in parts – something known as “phasing.” The income drawn that exceeds the tax-free cash allowance is subject to income tax at your highest marginal rate, reflecting the tax relief provided when the benefits were saved. Another key feature of drawdown is that on death, any unused funds can be passed onto a nominated beneficiary, possibly tax-free.

Tax reliefs are dependent upon personal circumstances, and pension and tax rules are subject to change by the government.

As the pension funds will need to provide retirement income for your lifetime, it’s important that the investments are properly structured to ensure they keep up with inflation and keep their value over time. It’s also extremely important that funds are invested in a way that suits your appetite for risk, and matches the level of capacity you have for losses when investment markets are unstable.

Drawdown and its effects are complex. It’s recommended that you seek independent financial advice before considering this option, as the best retirement plan is going to depend on your personal circumstances.

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