Updated: January 16, 2023
Pension Drawdown Retirement Income
Want to know if you can begin pension drawdown? Here are all the details explaining pension drawdown income before and after retirement.
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If you’re close to finishing your working career, you may be wondering if you can access pension drawdown plans (flexible retirement income) before retirement. Or, if you’ve already retired, you might be exploring phased or flexible methods for taking pension income.
This guide covers all the details you need to know about income drawdown arrangements before and after retirement. We’ll also explain how you can start accessing payments from a pension drawdown plan, and where you can get some expert advice to help.
Keep reading for a complete explanation or click on a link below to jump straight to a section…
Can you access pension drawdown before retirement?
Yes, this is possible. But, you’d still have to reach minimum pension age before you can start taking money or income from your pension. Typically, the minimum pension age is be 55 (this will be increasing to 57 in 2028), but the exact age can vary depending on the specific rules of your drawdown pension provider.
Once you reach minimum pension age, if you have a defined contribution pension, you should be able to enter into a Flex-Access Drawdown arrangement. So, you can start drawing pension income before you stop working. But, this may not be the best thing to do financially because it could heavily impact your income tax position.
Options before retirement
If you do want to access all or part of your drawdown pension before you stop working, there are a few options worth exploring:
Tax-free lump sum:
Drawdown tax rules mean you can take a 25% tax-free lump sum from the whole pot and leave the rest invested while you continue working.
Flexi-access drawdown:
Take the 25% tax-free lump sum and drawdown income on top of your salary.
But remember, this income will be added onto your current yearly salary which could have expensive income tax implications.
Uncrystallised Funds Pension Lump Sum (UFPLS):
This is a potential alternative to flexi-access drawdown, usually to generate a capital lump sum (not income) and the entire amount that’s crystallised must be withdrawn from the pension.
FAD, meanwhile, allows the crystallised pot to remain invested, with other options available for these funds instead of just income (such as short-term annuities).
Cash savings:
Technically this isn’t accessing your pension. But, if you need funds you can use cash savings before you retire without touching your pension, leaving it to grow whilst you’re still working.
If you’ve not yet reached minimum pension age, here are some things you should consider:
- Check that your pension is invested in a way you’re comfortable with – meeting your growth goals, ethical beliefs, and risk appetite.
- Make sure your pension provider offers drawdown income options for when you reach retirement age.
- Switching pension providers might be worthwhile if you want a cheaper provider, or more pension investment and drawdown options.
- Research the flexibility and investment options of using flexi-access drawdown instead of, or alongside, your other pensions.
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How to access pension drawdown in retirement
The best drawdown pension or way for you to access your pension once you retire/reach retirement age will depend on your exact situation.
But, here are some universal steps explaining how the drawdown process will work:
Make a plan
As you’re approaching retirement, it’s well worth taking time to sit down and think about your goals for this stage of life.
Take a look at your finances and bank statements to get an idea about how much your current lifestyle costs. And, whether you’ll be able to afford to stop working straight away, or if you need a few extra years of working and saving.
Speak with a pensions expert
Once you have an idea about your own finances and what your retirement goals are, the next step is to get some expert advice.
An independent pensions advisor will be able to take a look at your whole financial outlook and your current pensions.
They’ll be able to explain the best course of action for you to draw down pension income in retirement.
Drawdown pension income
If your advisor thinks that a pension drawdown plan makes sense, they’ll be able to see if your current provider allows this. Or, if it’s better for you to switch providers for more flexibility and better investment choices.
Your specialist pensions advisor will also help you structure pension drawdown income in the most tax-efficient way for your retirement.
Pension drawdown offers you a flexible way to access money and income in retirement.
But, it’s important that things are set up in the best way possible to maximise your retirement plans and ensure you don’t pay more tax than you need to. If you want to speak with an independent pensions expert for a free chat, just make an enquiry.
Making changes to your pension income once you stop working
The lead-up to your retirement is an important period for making decisions about your pension, which is why it’s well worth getting some expert advice ahead of time. Ideally, before you start making any permanent decisions.
Once you do stop working and want to make changes, this is still possible. But your options will depend on whether you’ve already started drawing from your pension.
For a general idea, here are some basic ways you can make a change to your pension drawdown income:
- Adjust how much you decide to take as income – you don’t have to take fixed payments of the same amount.
- Research investing the rest of the pot elsewhere for more growth or a steadier income (we believe that this is best done with some expert guidance).
- Speak to an expert about switching pension providers to give you more options, lower drawdown charges, better service, or improved drawdown flexibility.
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Drawdown for partial retirement plans
If you want to gradually retire while continuing to work, but perhaps with reduced hours, you can still plan for this. A pensions expert will be able to show you the best way to implement this.
This way, you can top up your reduced salary or wages with income from your pension whilst still maintaining the same standard of living.
Speak to a pension drawdown specialist
Pension drawdown plans offer you a flexible way to access your pension pot before or after retirement, taking regular income or a lump-sum payment. But, organising this in the best way to suit your individual needs requires some expert advice.
We offer a free, advisor-matching service. This means we’ll quickly assess your retirement needs and then pair you up with a suitable independent pensions advisor.
Just call 0808 189 0463 or make an enquiry. We’ll set up a free, no obligation chat between you and a pension drawdown specialist today.
Ask a quick question
We can help! We know everyone's circumstances are different, that's why we work with brokers who are experts in pensions. Ask us a question and we'll get the best expert to help.
Tony Stevens
Finance Expert
About the author
Tony has worked in a vastly diverse array of areas in the pensions industry for over 20 years. Tony regularly writes for trade press, usually on topical and pensions pieces as well as acting as a judge at prestigious national events.
Tony is also a highly qualified Independent Financial Adviser in his own right. His mantra has always been “Hope for the best, but plan for the worst”, and believes that the biggest impact that an adviser can have on a client’s life journey is to take them on a journey from generally having little or no real idea of what their retirement will look like, to giving them the understanding of what their retirement looks like now, then helping them navigate a path to what they want their retirement to be.
