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How drawdown works

How Drawdown

Income, tax and how to apply

Apply for drawdown Pension access calculator

Moving your pension into drawdown

You can move your pension into drawdown in one go, or move a bit in at a time. Up to 25% can be paid to you tax free, upfront, while the rest stays invested. You decide how much income to take (which is taxable), and when to take it.

You can apply for drawdown with your current pension provider (if they offer it), or transfer your pension to a drawdown provider like HL.

Before you transfer it’s important to check you won’t lose any valuable benefits or need to pay high exit fees first.

Taking your tax-free cash

You can usually have up to 25% of your pension paid to you tax free.

If you move your entire pension into drawdown, you’ll receive all your tax-free cash in one lump sum payment.

If you choose to move your pension into drawdown in stages, then you’ll receive your tax-free cash in stages too (up to 25% of the portion you move each time).

Remember pension and tax rules can change, and the value of benefits will depend on your circumstances.

More about tax-free cash

Choosing your income

You’re in control of how much income you take and when. You might decide you don’t need an income straight away, or even at all. You might just want to take your tax-free cash.

If you do want an income, you can choose to take regular withdrawals or just dip into the pot as and when you need to - it’s up to you.

Like all other pension income, it will be taxable and added to any other income you receive that same tax year. Be particularly aware of this if you’re planning on large withdrawals – don’t become a higher-rate tax payer by mistake.

Find out more about tax on withdrawals

Drawdown calculator

Drawdown income isn't secure so you need to think carefully about how much you take. If you withdraw too much too soon, you might fall short in later years.

Our drawdown calculator could help you understand how long your drawdown plan might last.

Picking your investments

For lots of people, one of the biggest attractions of drawdown is the potential for income to continue growing. But there’s no guarantee. Because investments carry risk, you could get back less than you invest. Your goals and plans for taking income will have an impact on what investments you choose.

With us, you’re free to choose your own investments from our full range, pick a ready-made portfolio (though these aren’t specifically designed for drawdown), or you can pay an adviser to choose investments for you.

If you’re looking for a good place to start, you might want to consider our drawdown investment ideas.


Most investments carry charges, and the income you ultimately receive depends on the returns from investments, less any charges. So remember to consider these, as well as charges of any other options you’re thinking about before making any decisions. See HL SIPP charges.

Holding cash

Keeping some planned income in cash might give you peace of mind, and means you can avoid selling your investments to generate cash for withdrawals. But cash can lose value over time especially if interest rates are low and inflation is high. Holding large amounts of cash for long periods is unlikely to be a good long-term investment.

Steps to apply

First make sure you fully understand your options. If you’re not sure about what's right for your circumstances, we strongly suggest you seek guidance from Pension Wise or contact us for advice. Drawdown in the HL SIPP is offered without personal advice as standard.

Request your personal illustration

This report shows how your chosen income withdrawals and investments could affect your pension value over time, and will give you an idea of when your money might run out (or what might be left over). We’ll send this to you in the post.

You’ll also get a set of risk questions which you’ll need to read through and answer.

Even if you’re just considering drawdown, this is a good first step to take.

Get started

Complete a risk questionnaire

If you’re happy with your drawdown illustration, and if you’re confident you understand the risks, call us on 0117 980 9926 to confirm you’d like to go ahead with drawdown.

You can also return your risk questions by post, or complete them online as part of step 1.

Once we have your confirmation, we’ll send you your application.

Complete and return your application

We’ll send this to you in the post, or by email if you prefer. On the application let us know which pensions you want to transfer (if any) and tell us how much you want to move into drawdown.

You’ll also need to tell us how much tax-free cash you want to take, and whether you want any income. You can give investment instructions alongside your application or wait until everything’s set up first.

New to drawdown?

Take a look at our guide to drawdown to find out more about the risks and benefits, and how to get started.

Download guide