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What is income drawdown?

Income drawdown allows you to keep your pension savings invested and still take money out whenever you need depending on how you invest your savings and the level of income you withdraw. There's the potential for growth, but there's also the possibility that your money could fall in value.

Drawdown suits people who are prepared to take some investment risk in return for a potentially higher income or who want the flexibility to vary their income or dip into their savings from to time.

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  • You can vary the income you take
  • Potentially grow your money if your investments perform well
  • Any fund left on your death can be passed to your beneficiaries
  • Normally no income tax for beneficiaries on death before age 75


  • Your income isn't guaranteed
  • You could run out of money
  • Your investments could perform poorly
  • Need to regularly review your investments and income

Any reference we make to taxation are based on our understanding of current legislation and HM Revenue & Customs practice, which can change.

Drawdown explained

Video transcript

This is Harry, he’s 55 years old. He’s a self-employed landscape garden designer and earns a good income. Over the years Harry has saved £90,000 in his pension pot. He’s planning to continue working full time so he doesn’t need it to live on just yet.

Harry is going to take all of his 25% tax-free allowance and use it to pay off his mortgage. This will free up a large percentage of his income to use on more exciting things. The rest of his pension pot he’ll leave invested where he hopes it’ll grow.

Harry’s current plan is to retire from work in time to start drawing his state pension. This money combined with drawing a regular income from his pension savings should last him for the foreseeable future. He knows he can change his mind at any time and decide to access his money in a different way.

That’s Harry’s story. If this is something you’d like to explore, talk to an adviser or get your online advice report today.

Things to consider about income drawdown

There are a number of options to consider with a drawdown arrangement from your pension.

  • Investment - You can decide where you'd like your money invested, and you can change your choices whenever you like.
  • Income - You can take a regular income or make occasional withdrawals or you can take nothing at all. It's entirely up to you.
  • Annuities - You can use some or all of your money to buy an annuity at a later stage. It can make sense to consider buying an annuity as you get older.
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