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Drawdown pension charges

Find out everything you need to know about pension drawdown charges.

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By Tony Stevens  | Pensions Expert

Updated: 22nd October 2019 *

If you're nearing retirement, a pension drawdown (also called 'income drawdown') allows you to access your pension funds when you need to, while keeping the rest of your savings invested during retirement. They're also transparent when it comes to the costs involved. 

However, charges and fees on pensions with a drawdown facility can vary considerably depending on which provider you choose. This article is going to cover what costs to expect when setting up a drawdown pension, and how these fees can vary depending on your situation.

If you’re still not comfortable making a decision, call us on 0808 189 2301 or make an enquiry and we’ll refer you to an expert who will compare providers and find you the best drawdown pension charges.

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How much does a pension drawdown cost?

Customers often ask us this, and the answer largely boils down to the charges and fees associated with the pension in question. 

As mentioned, all providers will work to different terms and the associated costs could have a big impact on how much you end up paying. Typical pension drawdown charges include (but are not limited to):

Charge More information about the charge
Set-Up Fees Typically a standard fee
Administration Fees Typically a standard fee but some lenders may calculate costs based on how much you have in your pension pot.
Fee(s) on withdrawal(s) of the 25% tax-free sum Some providers don't charge for any withdrawals of the 25% tax-free sum, others may charge a fee (set or variable) per withdrawal
Fee(s) on additional withdrawal(s) over the 25% tax-free sum Some providers will charge a set fee per withdrawal, some may charge a percentage of the fund, others will charge based on how much you withdraw each time.
Income Tax charged on each additional withdrawal Withdrawals outside the 25% will be added to any other income you have which could impact how much Income Tax you pay.
Fees for ongoing pension drawdown management Some providers will charge a set fee, but many will charge a percentage of your pension funds.
Transfer fee / exit charges Typically a standard fee.

Before committing to any product, it’s strongly advised to carry out a pension charges comparison to find out which income drawdown product is best suited to you.

Make an enquiry to compare income drawdown charges with one of the experts we work with.

Choosing the right pension drawdown product for you

No matter how much you have in your pension pot, drawdown enables you to withdraw up to 25% of your money, tax-free. After that, you’ll have to pay income tax on the remaining 75%.

Problems are most likely to occur when the 25% allowance is exceeded. As well as potentially limiting how much you can pay into a pension in the future, additional withdrawals from your pension will be classified as taxable earnings.

These funds will be added to any other taxable income you have, which could potentially put you in danger of being pushed into a higher tax bracket:

Income Tax rates 2019-2020 in England, Wales and Northern Ireland*

Income Tax Band Income Income Tax Rate
Personal Allowance Up to £12,500 0%
Basic Rate £12,501 - £50,000 20%
Higher rate £50,001 - £150,000 40%

Additional Rate

Over £150,000 45%

Income Tax rates 2018-2019 in Scotland*

Income Tax Band Income Income Tax Rate
Personal Allowance Up to £12,500 0%
Starter Rate £12,501 - £14,549 19%
Basic Rate £14,550 - £24,944 20%
Intermediate Rate £24,945 - £43,430 21%
Higher Rate £43,431 - £150,000 41%
Top Rate Over £150,000 46%

Further tax may also apply if the value of your pension savings exceeds £1,030,000 when you access the funds.

How do I compare pension drawdown charges?

The best way to find a low-cost pension drawdown solution is to search the entire market and compare the deals each provider is offering. This would usually mean a lot of legwork and there’s no guarantee you’d even find the pension provider offering the best products for your needs and circumstances.

With this in mind, the best way to compare products with drawdown facilities is by making an enquiry and having the pensions expert do the hard work for you. They can offer bespoke advice on pension drawdown and know exactly which providers are best positioned to offer favourable rates to a customer with your exact circumstances.

Talk to an expert in drawdown pensions and charges today

If you require more information, or want an accurate pension drawdown charges comparison carried out on your behalf, call us on 0808 189 2301 or make an enquiry.

Then sit back and let us do all the hard work in finding a low-cost pension drawdown provider with the right expertise for your circumstances. We don’t charge a fee, and there’s no obligation to make a purchase or marks on your credit rating.

Updated: 22nd October 2019
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FCA disclaimer

*Based on our research, the content contained in this article is accurate as of most recent time of writing. Lender criteria and policies change regularly so speak to one of the advisors we work with to confirm the most accurate up to date information. The info on the site is not tailored advice to each individual reader, and as such does not constitute financial advice. All advisors working with us are fully qualified to provide mortgage advice and work only for firms who are authorised and regulated by the Financial Conduct Authority. They will offer any advice specific to you and your needs. Some types of buy to let mortgages are not regulated by the FCA. Think carefully before securing other debts against your home. As a mortgage is secured against your home, it may be repossessed if you do not keep up with repayments on your mortgage. Equity released from your home will also be secured against it.

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