Flexi-access drawdown

Pension freedoms in April 2015 saw the introduction of flexi-access drawdown as a new type of drawdown. With flexi-access drawdown, there is no annual limit. Therefore, you can withdraw as much as you want from your pension. As part of our Bitesize Technical series, Senior Technical Consultant, Lisa Webster explains the rules around flexi-access drawdown.

Watch the bitesize video now or scroll down to read through the key talking points.

Key insights on flexi-access drawdown

What is flexi-access drawdown?

Flexi-access drawdown is a method of taking income from a defined contribution pension, such as a SIPP.

Income flexibility

Once funds are designated to flexi-access drawdown, you can withdraw them as needed, either regularly (monthly, quarterly, annually) or as ad hoc sums. There is no requirement to take income, and there is no upper limit on withdrawals. However, all payments are subject to income tax, so large withdrawals may lead to higher tax liabilities.

PCLS payment requirement

Most people take a Pension Commencement Lump Sum (PCLS) when they first access their pension. However, PCLS cannot be taken alone; funds must also be designated to provide pension income, typically through flexi-access drawdown.

Money Purchase Annual Allowance (MPAA)

Taking an income from flexi-access drawdown triggers the MPAA, which limits future tax-relieved contributions to defined contribution pensions. However, designating funds to flexi-access drawdown or taking PCLS alone does not trigger the MPAA.

Eligibility

Flexi-access drawdown is the only type of drawdown available for those who accessed their pension benefits on or after 6 April 2015. Those who started drawdown before this date may have used capped drawdown, which can continue indefinitely or be converted to flexi-access drawdown.

More Bitesize Technical

Take a bite out of 'Pension commencement lump sums (PCLS)', the previous instalment of our pension benefits Bitesize Technical series, or start from the beginning, here.