It is an option offered by pension companies that lets you turn your pension fund into an income when you reach 55.

Our comparison shows providers that offer income drawdown in exchange for your personal pension plan. Compare as many of their rates to find the best income drawdown deal.

How does it work?

When you have access to your pension fund, you can move it into drawdown which keeps your money invested. This means your fund could still grow or fall in value.

You can choose how much of an income you get while your money remains invested, but the more you take the less you may have later in life.

Do you need to transfer to get income drawdown?

No, but if your pension company does not offer you income drawdown, you can transfer your pension to another company that does.

Warning: You may incur charges if you transfer your pension fund to another company which could mean you have a smaller fund to get an income from.

What options do you get with income drawdown?

If your pension company offers it, you could:

  • Choose how much to take as an income and leave the rest invested

  • Withdraw up to 25% tax free from your pension then take the rest as an income

  • Withdraw up to 25% tax free from your pension then split the rest between an annuity and income drawdown

If you choose to take a large income from your pension fund from the start of your retirement, you may run out of money later in life.

Income drawdown or an annuity?

You could choose to have both, but think about the following before you make any decisions:

  • Income drawdown could leave you with little or no money later in life if you do not restrict how much of an income you take each year.

Your money remains invested through income drawdown so the value of your money could go up as well as down.

  • An annuity gives you a guaranteed income for life in exchange for your whole pension fund. You may not get a big income, but it will continue to pay out until you die.

Income drawdown pension FAQs

Q

Does my pension company have to offer me income drawdown?

A

No, but if it is something you want then you could transfer your pension fund to another company that does offer income drawdown.

Q

Can I make withdrawals from an income drawdown pension?

A

Yes, but only the first 25% of your withdrawal will be tax free. The more you withdraw, the less you have to take an income from through your retirement.

Q

Am I taxed on income drawdown?

A

Yes, but how much will depend on your income tax rate. You can find out more on pension tax here.

Q

What is flexible income drawdown?

A

When you can change the amount you take as an income. This helps prolong your income based on if your investments are growing or falling in value.

Q

Is there a limit to how much I can take as an income?

A

Most income drawdown pensions let you take what you want, but capped income drawdown pensions restrict how much you can take each year.