Income Drawdown

Income Drawdown’s main difference to an annuity is that the money remains invested and you simply take a pension income directly from it. This is the most flexible way to take your pension benefits, although it may not be suitable if you want the security of income that an annuity offers.

This option might suit you if you want:

• To still pay in – If you are under 75, you can still add to your pension pot and get tax relief

• Growth potential - As the pension pot stays actively invested within a tax efficient environment, there is potential for real future growth.

• A flexible pension income - You want to be able to take payments to suit you and have a large investment fund (minimum is £50,000) that can sustain you withdrawing directly from it

• Control - An annuity can be bought at any time

• Flexible options on death – unlike some annuities, this pension can give flexible benefit options after your death 

How much income will you get?

Income drawdown allows you to take a flexible income directly from your invested pot, within limits set by HM Revenue & Customs (see Risks and limitations). Aside from these limits, the income you'll get depends on a number of factors. The most important ones are:

• The amount of money you have available in your pot to take an income from

• How often you draw an income and the amount you take from your pot. The more you take, the less you will have for future years

• How your investments perform. For example, a lower than expected performance can reduce the amount of income you can take in future.   

The Standard Life difference

You’re supported by Standard Life’s award-winning customer service. We’ll take you through the transition from having a pension fund to receiving an income - smoothly and easily.

Taking Income Drawdown from Standard Life with a pension plan from someone else

If you want to take Income Drawdown with Standard Life using the value of a pension plan you hold elsewhere, then call Standard Life Direct on 0845 272 8810 (call charges may vary) or speak to your financial adviser.

Transferring a pension plan needs careful thought as it may not be suitable for everyone. You may be giving up valuable benefits you have with your existing plan. We'd recommend you get financial advice to make sure it’s the best option for you.

• Investment risk – As the pension pot stays actively invested, there is a risk that your investments do not perform as required. Some riskier investments will usually be necessary to achieve the return needed for the pension income to match the income available if a conventional annuity had been bought immediately.  You need to be comfortable with this level of risk

• Mortality risk – As you get older, you need to consider the effects of mortality drag – because your pension pot gets smaller each time you draw an income, your return from investments needs to get greater to pay out the same level of income.

• Pension income can go down – Poor investment returns, particularly if coupled with high pension income payments, could result in a significant reduction in your pension pot’s value.  This could mean that pension income is lower than if a conventional annuity had been bought.  Also, future annuity rates are not guaranteed and could be worse if an annuity contract is finally bought than they were when income drawdown started.

• Charges – These are generally higher than for conventional annuities.

• Ongoing maintenance – An income drawdown plan needs regular reviews.

• HMRC income limits - HMRC set an upper limit on the amount of pension income that can be taken under the income drawdown rules, to stop you from using up the pension pot too quickly. This limit must be reviewed regularly and you don’t have to draw any income if it isn’t needed

• Refer to the Key Features (PDF, 331kb) for full information

Get financial advice

Need help deciding? You can do this by contacting Standard Life Direct on 0845 272 8810 (Call charges may vary) or speak to your financial adviser.

Standard Life Direct is provided by Standard Life Client Management which advises on, and sells products from, subsidiaries of Standard Life plc and some external providers.

This is where the real benefits of income drawdown are. If you’re not sure how and when you want to take your money in retirement, this could really work for you.

The following options exist:

• Still pay in - If you are under age 75, you may still want to add to your pension fund and get tax relief

• Immediate lump sum - You want to take your tax free lump sum of normally up to 25% now but don’t want to take an income, maybe because you’re still working

• Flexible pension income - You want to be able to take a variable income rather than a guaranteed amount. The level and timing of your pension income can be varied (within the income limits) to help tax planning, and there is no need to take any income if it isn’t needed.

• Flexible options on death – Unlike a standard annuity, income drawdown can give flexible benefit options after your death. Your dependants can continue to take a pension by income drawdown or use your pot to buy an annuity. Alternatively, the remaining pot can normally be paid as a lump sum (less 55% tax) on death.

• Control - An annuity can be bought at any time, giving you control over the timing of any annuity purchase.  Alternatively, you can choose to continue using income drawdown

• You need to have a pension fund of at least £50,000 to be eligible for Income Drawdown

• You must be under age 75 to start a new income drawdown plan (but you can transfer an existing plan after this age)

• You must be a UK resident

• Income Drawdown can only be purchased using Standard Life’s Self Invested Personal Pension, to find out how to buy one of these call us direct on 0845 272 8810 (Call charges may vary)

Income tax

The income you take from your pot will be taxed under the Pay As You Earn (PAYE) system. You can find out more on the HM Revenue & Customs website.

This link is provided for general information purposes only. Standard Life accepts no responsibility for information contained in the site or for the site not being available at all times.

HM Revenue & Customs limits on pension tax relief

Personal payments into pensions only attract tax relief if they are within 100% of relevant UK earnings for the tax year concerned (or £3,600 if greater). Tax charges may apply if you exceed the Annual allowance. Further information regarding the Annual allowance is available in the Key Features (PDF, 331kb).

Tax rules and legislation may change. The value of tax relief may change and will depend on your financial circumstances. The information we have given is based on our understanding of law and current HM Revenue & Customs practice.

Are you old enough?

You cannot normally access your money until age 55.

We include the charges and costs for your income drawdown when we work out how much income your plan will buy. You will pay charges each time you draw an income.

Our documentation e.g. quote and policy schedule will show these charges