Frequently asked questions
Planning for drawdown
Do I have to move my whole pension into drawdown?
No, you can move a bit in at a time if you want to. You can normally take up to 25% of the portion you move into drawdown as a tax-free cash lump sum each time.
Can I still pay into pensions if I’m in drawdown?
Yes, you can still make pension contributions. You’ll still receive tax relief on personal contributions provided you’re within your contribution limits and you’re under 75.
Pension contributions are normally restricted to a £40,000 annual allowance. This applies to any benefits you’re building up in defined benefit (e.g. final salary) or money purchase (e.g. personal, self-invested) pensions.
Once you take your first taxable income payment from drawdown, the amount you can pay into money purchase (e.g. personal, self-invested) pensions will be limited to £4,000 each tax year. This is called the Money Purchase Annual Allowance. Taking tax-free cash alone won’t have an effect. If you’re already in capped drawdown you won’t be affected either, unless you flexibly access pension benefits later on or elsewhere.
How much tax-free cash can I take?
You can normally take up to 25% of the amount you use for drawdown as tax-free cash. This will be paid as a lump sum when you apply.
For example, if you had a pension worth £100,000 and you decided to use it all to move into drawdown, your tax-free lump sum could be up to £25,000. If you decided to only use £40,000 of that pension to move into drawdown, you could have up to £10,000 paid as a tax-free lump sum.
What happens to my drawdown pension when I die?
When you die your drawdown pension can be passed to your beneficiaries, in most cases free from inheritance tax.
If you die before 75, your beneficiaries can normally withdraw what they like from your pension tax free. If you die at or after 75, your beneficiaries can still withdraw what they like, but it will be taxed as their income.
You can nominate as many beneficiaries as you like and can change them at any time. The easiest way to do this is online. Just log in to your account and choose Account Settings, followed by Manage SIPP beneficiaries. Though these nominations aren’t binding they do let us know your wishes, which must be taken into account.
Please remember tax rules may change in the future. Our factsheet has more detail if you’d like to read more.
Do I need to choose my own investments?
With us, you’re free to pick your own investments, choose from ready-made portfolios (though these aren't specifically designed for drawdown), or pay an adviser to select investments for you. To get you started you could take a look at our drawdown investment ideas.
How old do I need to be to apply?
Usually, you need to be 55 before you can access the money in your pension (this is rising to 57 from 2028). This includes applying for drawdown.
This might be lower if you’re unable to work because of your health or terminally ill.
What is the Lifetime Allowance?
This is the total amount you can build up in all your pensions over your lifetime without incurring a tax charge. It’s currently £1.055m. Full details can be found in our lifetime allowance factsheet.
Your pensions are measured against this allowance whenever you take benefits from them, when you turn 75, and if you die before the age of 75 with pension benefits left to take.
If you’ve already built up a large pension pot, you might be able to register for protection with HMRC so you don’t get caught out by this restriction. Tax rules can change.
What’s the first step?
To see what might happen to your pension value and income, you can request your personal drawdown illustration.
It’s designed to help you decide if drawdown might be right for you or not. It’ll show how your chosen income withdrawals and investments could affect your pension value over time. It’ll also give you an idea of when your money might run out (or what might be left over).
How long will it take to get my tax-free cash?
If you apply for drawdown with us, you should receive your tax-free cash within 10 working days after we receive your completed application (assuming there’s nothing outstanding).
How much income can I take?
You can take as much income as you like, and can start, stop or change the amount you take at any time. You should bear in mind how long you need your pension to last though. If you take too much too soon you could leave yourself short in later years. Remember that income in drawdown isn’t guaranteed.
Our drawdown calculator could give you an idea of when your money might run out (or what might be left over).
How will my income be taxed?
Pension income is taxable and will be added to any other income you receive that same tax year. If you plan on making a large withdrawal, you might consider splitting it across two tax years to make the most of tax bands and your allowance. Remember tax rules can change and benefits depend on personal circumstances.
What investments can I choose from?
With us, you’re free to choose your own investments (including funds, shares, bonds and more), pick a ready-made portfolio (though these aren't specifically designed for drawdown), or you can pay an adviser to choose investments for you.
Your goals and plans for taking income could impact on where you choose to invest. You could take a look at our drawdown investment ideas to help get you thinking about your own strategies.
Where can I see the charge I owe?
You can view your account charges by logging in to your SIPP, choosing the ‘Account Administration’ tab, then selecting ‘View history of fees charged’.
How do I pay charges?
We'll take them from the cash you hold in your SIPP account automatically each month.
How much cash you’ll need for fees depends on the value of your investments. We’ll suggest an amount for you based on your holdings, which you can see in your SIPP when you log in. Just look for the 'suggested minimum balance' on your account dashboard.
Remember any available cash held on your account will be used to pay fees first over any pending income withdrawal. So if you’re planning on making withdrawals from your drawdown plan, you’ll need to make sure you have enough available cash to cover both your fees and withdrawals.
Please see the drawdown charges page for full details, including dealing charges.
What happens if there's not enough cash in my account?
If there isn’t enough cash in your SIPP to pay charges each month, we’ll take charges from any cash in your HL Fund and Share Account (if you have one). As a last resort, we’ll sell some of your investments to cover charges, which costs £1.50 per deal. Full details can be found in our terms and conditions.
You can set up an alert and we’ll notify you if there isn’t enough cash available.
Paying charges from a different account
If you’d like to always pay your SIPP charges from cash in your HL Fund and Share Account, it’s easy to set this up online.
- Log in and click on the 'Account Settings' tab
- Select the 'Fees and Minimum Cash Balance' section
- Click on 'Edit fee collection options' and follow the instructions
Transferring a pension
How do I transfer a pension?
It’s easier than you might think. But first check with your existing provider that you won’t lose any valuable benefits, or need to pay high exit fees.
If you want to transfer to the HL SIPP you just need to complete a transfer application. We’ll take it from there and keep you posted along the way.
How do I transfer an existing drawdown pension?
You can choose to transfer your pension as cash, which means selling your investments before the process starts, or you might be able to transfer your pension without selling anything (if your new provider offers the same investments).
Transferring as cash means you’ll be out of the market, so you won’t benefit from any market rises, but you won’t suffer from any falls either. It’s often the cheaper option and the most popular choice among our clients. You’ll be free to reinvest your money as you wish once the transfer’s complete.
If you’d prefer to transfer your investments, you should bear in mind you won’t be able to make any changes to your investments until the transfer’s complete.
If you want to transfer a capped drawdown plan to the HL SIPP, you’ll have the option to convert to flexible drawdown (where income isn’t restricted) when you apply. Remember though, this is an irreversible decision, and means contributions into money purchase pensions (such as your SIPP) will be restricted by the Money Purchase Annual Allowance (MPAA) – currently £4,000 per tax year.
Before transferring, check with your existing provider that you won’t lose any valuable benefits, or need to pay high exit fees. We’d also recommend you arrange for any planned income to be paid before the transfer starts, as income can’t be paid while a transfer’s in progress.
Managing your HL drawdown account
How can I change my income instruction?
If you want to start taking an income or make any changes to the amount you’re already taking, you can let us know by calling 0117 980 9940, via secure message (if you’ve registered for online access), or in writing. One-off income withdrawals can also be requested via your online account.
All income instructions must be received by the 17th of the month in which the request should take effect.
When are income withdrawals paid?
Your requested income payment should arrive in your bank account on the 28th of the month (or the previous working day if this isn’t a working day).
What if I decide I’d like to buy an annuity later on?
You can use some or all of your drawdown pension to buy an annuity at any time.
If you decide an annuity is better for your needs, please contact us and we’ll give you a free annuity quotation showing some of the most competitive rates available.
What if there’s not enough cash to cover my income payments?
You’ll still receive an income payment but it will be for the amount you hold in available settled cash (as long as this is at least £50).