Income drawdown is where you leave your pot invested and take an
income directly from it, instead of using the money in your pot to
buy an income (an annuity) from an insurance company. Income
drawdown is also known as an unsecured pension.
As the rest of your pot remains invested, it will continue to
benefit from any investment growth. You may, at any time, use
whatever is left in your pot to buy an income (an annuity) from an
insurance company. You can also take up to 25% of the amount you
move into income drawdown as a cash lump sum. However, your scheme
or provider may insist that you buy an income at 75. You should
check this out with your scheme or provider.
You do not have an automatic right to income drawdown. Your
scheme or provider does not have to offer you this
You do not have to take a minimum amount of income from your
pot. You can leave your pension pot untouched for as long as you
want to, without taking any income.
The maximum amount of income you can take is equal to an amount
set by the Government. It is 150% of the income someone of your sex
and age could buy as an annual annuity, using rates set by the
Your income will usually be compared against the maximum income
every three years until you are age 75, then every year. The
maximum income will be based on the Government rates for someone of
your age at the time of each review.
You may be able to take a cash sum after you reach 75, if you
have chosen to set aside funds for income drawdown at the same
time, even if you decide not to take an income.
You generally need a large fund value to take income drawdown.
You need to check with your scheme or provider what minimum fund
value they will accept for this purpose.
It you are thinking about using your pot for income drawdown,
you should seek independent financial advice. You can click here to
find out more about choosing an independent financial adviser.
Click here to find
out about the tax rules for income drawdown.