How much do you really know about drawdown?
Over £25 billion has been withdrawn from pensions using flexible income options like drawdown, making it one of the most popular retirement options available - but do you fully understand it?
Take this short quiz to test your drawdown knowledge - a flexible choice.
You have to be at least 65 to access your pension and move into drawdown. True or False?
You can normally access your pension from as early as 55 (rising to 57 from 2028). You might be able to access your pension sooner if you have a protected retirement age or you're unable to carry out your occupation due to ill health.
You can receive a tax-free lump sum each time you move money into drawdown. True or false?
Each time you move money into drawdown, you can usually have up to 25% of that amount paid to you as a tax-free lump sum. So you don’t have to move everything into drawdown at once. You can then make further withdrawals from the money in drawdown, which is taxable. Tax rules can change and any benefits will depend on your circumstances.
You have to take personal advice to setup drawdown. True or false?
There’s no legal requirement to take personal advice if you have a personal pension (such as a SIPP) and are happy to make your own investment decisions. In fact, more than 44,000 of our drawdown clients have chosen to manage their drawdown plan, without the need for advice. To see how long your pension could last in drawdown, simply request your illustration at the end of this quiz.
You can withdraw whatever income you like from drawdown. True or false?
You’re free to take as much or as little income from drawdown as you want to. You can change the amount and frequency at any time. How much you withdraw and when will depend on your circumstances – taking large withdrawals could affect how long your pension lasts and how much tax you pay. Like 33% of our drawdown clients , you might decide to simply take your tax-free cash and put off taking a taxable income until a later date.
You have to select your own individual investments in drawdown. True or false?
You can be as involved as you like when choosing investments. Our clients have the flexibility to pick individual funds and shares or use ready-made investment portfolios. If you’re unsure where to invest you could also let an adviser choose the investments for you. All investments can fall and rise in value, so you could potentially receive more or get back less than you invest.
A drawdown pension can be passed on tax free to loved ones after death. True or false?
If you die before 75, your drawdown pension can normally be passed on entirely free of tax. If you die at, or after, 75 your beneficiaries will pay tax at their marginal rate when they make withdrawals. Tax rules can change and any benefits will depend on individual circumstances.
You can only apply for drawdown with your current pension provider. True or false?
You can choose to transfer you pension and apply for drawdown elsewhere. There’s no obligation to stay with your existing pension provider. It’s important to shop around and compare providers to make sure you receive the most for your money. There are many different factors to consider including the range of investments available, charges, online functions and the level of information and support available to you. Before transferring check you won’t lose any valuable guarantees or need to pay high exit fees.
Your final score