Can I Draw Down My Pension?

Will My Pension Allow Income Drawdown?

Most modern self-invested personal pensions or SIPPs will allow you to use pension drawdown, as will some other types of defined contribution pensions. However, there’s no guarantee this is the case and the best way to find out is by asking your pension provider.

With certain older pensions, it’s very unlikely you’ll be able to use pension drawdown. Such plans include:

• Section 226 retirement annuity contracts (RAC) or section 32 buy-out plans
• Defined contribution occupational schemes
• Additional voluntary contribution (AVC) and free-standing AVC plans
• Many older personal pension contracts including stakeholder or group personal pension (GPP) arrangements.

Why Won’t My Pension Won’t Let Me Use Drawdown?

Although the pension freedoms gave most people the option to draw down your pension, they didn’t force every money purchase pension provider to offer pension drawdown. For many older schemes it’s simply not possible, and even funds that do allow income drawdown may have rules restricting its availability and your ability to access it.

Some may only allow partial flexi-access drawdown, while others could have rules imposing minimum fund sizes before they’ll allow you to make use of pension drawdown. Again, the best way to find out is to enquire with your provider.

If your current provider doesn’t offer pension drawdown then it’s possible transfer your defined contribution pension to a plan that will.

However, if your pension provider has said you need to have a minimum fund value before you can use drawdown then it could well be in your best interest, because those with smaller pension pots are at risk of their pension running out with income drawdown. You’ll have to consider whether drawdown is right for you if this is the case.

To assess how likely it is your pension will run dry, you can check your risk with the Drewberry Pension Drawdown Calculator, which can help you better manage your pension withdrawals.

Can I Draw Down My Final Salary Pension?

Essentially, no. If you have a final salary or defined benefit pension, you won’t be able to take advantage of the new pension freedoms.

Defined benefit pensions are a promise to pay you an income for the rest of your life after you retire — there’s no pot of money you’ve been saving into over your working life as with a defined contribution scheme.

Final salary schemes have a number of benefits, including:

• There’s no investment risk on your behalf
• It will never run out
• It usually provides a reduced survivor’s pension for your spouse after your death.

However, some people would still prefer to be able to draw down final salary pensions in the same way they could a defined contribution pension rather than receiving a fixed income.

This could be to benefit from greater tax advantages, both during your life and when your loved ones inherit your pension after your death, or simply a desire to manage your own portfolio and with it your retirement future.

Can You Use Drawdown With a Final Salary Scheme?

While you can’t take advantage of income drawdown with a final salary scheme as the scheme stands, there is an option to consider known as a final salary pension transfer.

Here your pension fund offers you a cash lump sum invested in a defined contribution plan in exchange for you giving up your guaranteed lifelong income. These lump sums providers are willing to offer are known as cash equivalent transfer values.

If your final salary pension is worth more than £30,000 you’ll be required to seek professional advice. This said, we always recommend seeking advice on something as complex as a final salary pension transfer, regardless of the size of the pot.

Your Financial Plan: Build A Better Future

A good financial plan can help you make the right decisions when it comes to your finances. Make the right decisions today to build a more prosperous future.

Good financial planning with clear goals can increase your retirement income by as much as 53%. Old Mutual Redefining Retirement Survey

Why Speak to Us…

We started Drewberry because we were tired of being treated like a number and not getting the service we all deserve when it comes to things as important as planning our finances. Below are just a few reasons why it makes sense to let us help.

• See your financial future
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• Achieve the retirement you deserve
  Can afford that dream round-the-world trip? Can you help your children onto the property ladder? We’ll model your goals and build your financial plan to help you achieve them.
• Our expertise saves you time and provides peace of mind
  Organising your pensions, investing your assets, managing risk and making the most of your tax allowances is all taken care of as part of your financial plan.
• We’ve got bargaining power on our side
  This allows us to negotiate better rates for you than dealing with providers yourself.
• You’ll speak to a dedicated expert from start to finish
  You will speak to a named expert with a direct telephone and email. No more automated machines and no more being sent from pillar to post – you’ll have someone to speak to who knows you.
• Benefit from our 5-star service
  We pride ourselves on providing a 5-star service, as can be seen from our 2386 and growing independent client reviews rating us at 4.92 / 5.
• Gain the protection of regulated advice
  You are protected. Where we provide a regulated advice service we are responsible for the decisions we help you make. Doing it yourself or going direct to a provider won’t provide this protection, so you won’t benefit from these securities.