- Getting the best pension advice
- Choosing the right platform
- Top drawdown providers
- Income Drawdown Calculator >>
- Is drawdown best for me?
- Why get advice?
- Choosing the best drawdown investments
- Avoid pension scams
- Need advice?
Content Manager at Drewberry
Choosing Flexi-Access Drawdown
Under the old rules, fully flexible pension drawdown was only available for the wealthiest pensioners, those who had a guaranteed income of £12,000 per year outside of the fund they were looking to draw down. The alternative was capped income drawdown, which placed a restriction on how much pension income you could withdraw.
Today there is just a single type of pension drawdown that offers flexibility to anyone with a defined contribution pension, regardless of income and this is called flexi-access drawdown.
Now this highly versatile method of drawing your pension is more widely available, it’s important to compare the best pension income drawdown products and get some expert advice to make sure it is the right option for you.
How to Compare the Best Pension Drawdown Providers
There are a number of factors to consider when you compare flexi-access drawdown providers. Although pension drawdown is a fairly homogeneous product in terms of what it offers – a flexible way of accessing your pension – there are a number of different providers all with different propositions.
The end result may be similar, but the way you access your pension and pay for pension drawdown could vary drastically between providers. That means finding the best income drawdown provider for you isn’t a one size fits all process.
What to Look for When Choosing Pension Drawdown
- Will you have access to a good range of investment funds?
The whole point of flexible drawdown is that your pot stays invested. That means you want as many options as possible for you and/or your adviser to invest in.
- Will it be easy to vary your income?
Another point of flexi-access drawdown is that it’s flexible. Not all providers will offer the maximum level of flexibility you might require, though. Will it be easy to vary the payments you take and when you take them?
- What will pension drawdown providers charge?
This is one of the biggest pension drawdown questions you should ask. There could be platform fees, management fees and an array of other charges, including potentially a charge each time you designate cash to drawdown.
- Can you access your drawdown account online?
Many people prefer the instant access offered by having their pension drawdown funds available to view over the Internet. Some providers will even offer a smartphone app. Online access also makes it easier to manage your pension 24/7.
- Is your provider regulated by the FCA?
See the section on avoiding pension scams below, but it’s essential you choose a provider regulated by the FCA to ensure your retirement savings are held in a well-managed institution.
Some of the UK’s Best Pension Drawdown Providers
Based on our research, below is a selection of the best UK income drawdown providers. However, this list is not exhaustive and there are many more options out there available on the market.
Pension Drawdown Providers
Aegon’s UK operations are wholly owned and operated by Dutch life insurance, pension and asset management firm Aegon N.V. Aegon was formerly known as Scottish Equitable but, after Aegon N.V. increased its stakeholding to 100% of the company, Scottish Equitable eventually re-branded to Aegon in 2009. Aegon sells pensions, annuities, life insurance, protection insurance and investment products to individual customers across the UK.
Ascentric was formed in 2006. Royal London quickly acquired a majority shareholding in 2007, eventually going on to wholly own Ascentric by 2014. Ascentric has £13bn in assets under administration as of March 2017 and is committed to offering simple pricing, a clear and transparent structure, no additional fees and one annual platform charge.
Liverpool Victoria is the UK’s largest friendly society and was founded in 1843. It’s one of the UK’s biggest general insurers; on top of offering general insurance it provides protection and life cover alongside both annuities and pension drawdown.
Based in London but founded in South Africa in 1845, Old Mutual is a global investment, savings and bancassurance company. In the UK, as well as offering retirement solutions and a range of other financial services, Old Mutual also owns and operates the Intrinsic financial adviser network.
Pension Income Drawdown Calculator
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Pension Drawdown Overview
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Head of Pensions Advice at Drewberry
Is Pension Drawdown the Best Retirement Option for Me?
Flexi-access drawdown is an inherently flexible way of accessing your retirement savings. Pension drawdown can also offer better tax efficiency than other methods of taking your pension because it allows you to dial up and down your income as required in any given tax year.
However, while pension drawdown has many benefits, it’s not necessarily the best pension option for everyone. For those people who make a guaranteed, lifelong income an absolute priority there are still few alternatives to an annuity. There may be other reasons why drawdown isn’t right for you – to be sure, it’s worth speaking with a pensions adviser.
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Why Get Pension Drawdown Advice?
Put simply, your pension is likely to be the biggest asset you’ll ever own besides the one that you live in. And with recent high cash equivalent transfer values on offer for those who transfer out of final salary pension schemes, some people have found that the value of their final salary pension pots now exceeds that of their home.
With this much cash at stake, seeking out best pension advice is essential to ensure that your retirement savings are put to good use. Not getting advice could have catastrophic consequences for your future income in old age.
This rule of thumb is no less true for flexi-access drawdown advice than for any other aspect of retirement planning. A qualified adviser will be able to help you with pension drawdown in a number of different ways.
Finding You the Best Drawdown Pension Provider
Before you even start to see a penny from flexi-access drawdown, you’ll have to choose a drawdown provider. Not every pension provider will allow you to use income drawdown (although most modern self-invested personal pensions or SIPPs will). However, if yours doesn’t, you may have to transfer your pension to a provider that does.
And even if your pension provider will allow you to opt for drawdown to provide your pension income, there’s no guarantee that they will offer you the best pension drawdown deal in the market. As with most financial products, it pays to shop around.
The Costs of Pension Drawdown
There can be a huge array of fees, charges and other costs when setting up an income drawdown pension and drawing benefits from it, so it’s definitely worth comparing the various flexi-access drawdown providers’ propositions to see which one will work out better for you.
These pension drawdown fees might include platform fees and management charges, as well as charges each time you actually draw cash. There may also be a fee for transferring your pension to that provider, so you’ll have to take that into account as well.
So when your adviser searches for the best pension drawdown provider for you, part of their job will be balancing the benefits of each provider with the fees you’ll be charged.
It’s rarely the case of simply picking the cheapest pension drawdown provider. While there are many excellent low-cost flexi-access drawdown options available, if they don’t suit your needs in other ways then choosing them purely on the basis of cost could be a bad choice.
Pensions & Investments Expert at Drewberry
How Much Income Can You Take With Pension Drawdown?
This should be your foremost consideration if you’re thinking about pension drawdown – unlike an annuity, flexi-access drawdown offers you no lifelong guarantee of an income.
A tool such as Drewberry’s Pension Drawdown Calculator can give you an idea of when your income drawdown pension will run out, but it’s no substitute for the expertise of a financial adviser.
A pensions adviser can help put together a tailored schedule of payments from your drawdown fund, finding the best way to balance your need for income with longevity risk.
This will be to try and ensure you can live comfortably in retirement but won’t run out of cash too early.
Victoria swiftly helped in finding a solution which offered the required cover, with a more competitive premium.
Help With Choosing the Best Pension Drawdown Investments
A big part of opting for pension drawdown is choosing the best investments for your circumstances. An adviser will also be able to discuss with you your appetite for risk and, given that, steer you towards the better pension drawdown investment options for you.
At the most conservative end of the scale would be investments in cash and government gilts. These are among the safest investments around but the fact that there’s so little risk involved also means that, in today’s low-rate environment, there’s also very little reward. However, if you’re not comfortable with investment risk this may be the best option for you.
More adventurous investors would likely hold a larger proportion of their fund in dynamic assets such as equities, i.e. stocks and shares. However, there is more risk of volatility with equities that not everyone is happy to take on.
Other options include corporate bonds and commercial property, while you can also invest your assets in funds such as unit trusts or investment trusts.
There’s no simple answer when it comes to where you should invest your income drawdown pension. It will depend on your appetite for risk, the size of your pension pot, any other assets/income streams you have and your life expectancy.
That’s why it’s so important to discuss your flexi-access drawdown investments with an adviser who can help you pick the best option for you.
Wealth & Investments Expert at Drewberry
What’s the Best Way to Avoid Pension Scams?
The freedom and flexibility introduced by flexi-access drawdown has benefitted many people, but unfortunately pension fraudsters have taken advantage of growing consumer awareness of pension drawdown and put together scams to con you out of your retirement savings.
Pension fraud might include promises to unlock or release your pension, especially before the age of 55. While this might sound similar to legitimate pension drawdown, it’s actually very different.
This is particularly true if you look to access your pension before the age of 55, which is almost never possible unless you’re terminally ill.
While a small minority of historic pension schemes allow you to start drawing your benefits before the age of 55, this doesn’t apply to many active schemes. If you’re wondering if this applies to you, it’s easy to find out with a simple phone call to your pension provider.
Accessing your pension early, before the age of 55, will almost always be classed as an ‘unauthorised withdrawal’ by HMRC unless you’ve been given special permission because your life expectancy is severely compromised. As such, HMRC will most likely slap you with a 55% charge on your withdrawal. That’s before you’ve even paid the often steep fees pension scammers usually levy on the whole process.
Also, promises of ‘guaranteed returns’ should ring alarm bells. All investment carries risk and your fund could always go down as well as up. While there are cautious portfolios designed for those who dislike investment risk which aim to minimise the risk of loss as much as possible, there are no definitive guarantees. If you’re promised guaranteed returns that seem extremely high – e.g. in double digits – be extra cautious.
One basic question to ask yourself is this: Does it sound too good to be true? If so, as with most areas of life, it most likely is.
Drewberry’s Top Tips to Avoid Pension Fraud
- Check the FCA register – the Financial Conduct Authority publishes a register of all authorised financial services firms in the UK, which also includes companies previously reported to the FCA for involvement in illicit activity
- Beware cold calls – Drewberry will follow up with a phone call if you leave your details on our website and announce who we are, but if you receive a phone call out of the blue from a company you’ve never heard of or interacted with promising easy access to your pension, the best thing to do is hag up
- Check the company’s address – go online and check the company’s online presence and see if it offers a physical address. Even if it does offer a physical address, check that address – is it an office or simply a provider of PO boxes?
- Make sure you can call the company back – if a company won’t accept an inbound phone call from you, ask yourself why. No legitimate firm doesn’t have an inbound phone service set up. At Drewberry, you can call us on 02084327333 during office hours to discuss your pension needs
- Don’t be rushed into a decision – you should be able to take as much time as you’re comfortable with when deciding what to do with your pension. It’s a major financial decision and no genuine company will attempt to rush you into making a decision. Common tactics include sending a motorbike courier to your door with papers to sign on the spot
- Pension drawdown doesn’t let you unlock your pension before age 55 – don’t be drawn in by a company promising to give you access to your pension before the age of 55; this is never possible unless you’re terminally ill or are one of a very small number of people who are permitted to draw benefits from their scheme early
- There are no loopholes – no matter what you’re promised, there are no loopholes or any other means of unlocking your pension early unless you’re terminally ill
- Contact the Pensions Advisory Service – if you’re being pestered with phone calls about your pension and are concerned, the Pensions Advisory Service can help.
Need the Best Income Drawdown Advice?
The team of qualified, registered pensions advisers at Drewberry can help you with all aspects of pension planning, including offering help and guidance if you opt for pension drawdown.
If you’re attracted to the flexibility of pension income drawdown, or even if you’re just considering whether flexi-access drawdown is the best pension option for you, then our advisers can help.
Don’t hesitate to drop us a call on 02084327333 to discuss all your pension needs. Alternatively, pop us an email on firstname.lastname@example.org.