This gives you flexible access to your pension savings to take money out as and when you need it.
It’s one of the ways you can access your pension savings after you’ve reached 55 (the government proposes to increase this to age 57 from 2028).
It’s possible to take up to 25% of your pension savings as a tax-free lump sum with the balance going into flexi-access drawdown. Once you’ve money set aside in flexi-access drawdown, if you’d like to you can take a partial income from your flexi-access drawdown account, while leaving the rest of your money invested to grow further. This could be especially handy if you’re only partially retiring. Also known as income drawdown.
- As your money remains invested, the amount of income you get might rise and fall, depending on how your investments perform. Any income taken is added to your income for the year and taxed in the normal way.
- Once you’ve received the first flexi-access drawdown income payment from your flexi-access drawdown account, this can trigger a lower annual allowance of £4,000. This is known as a money purchase annual allowance (MPAA).
- There’s a risk you could run out of money to live on in your retirement, if you take too much money out early on. But you could use any remaining money to transfer to a guaranteed income (an annuity) later on.