Flexi Access Drawdown
What is Flexi access drawdown?
Sometimes referred to as Income Drawdown, this type of arrangement allows you to retain greater control of your pension savings. After withdrawing 25% of the pot as a tax-free lump sum (if required), the balance of the fund remains invested. You can then draw as much (100% of the balance, subject to taxation), or as little (the minimum is zero) as you like.
The flexibility and planning opportunities this enables, can allow you to phase your retirement and continue to give your funds the potential to grow through taking on investment risk during retirement. With good planning, you may be able to reduce the tax on withdrawals whilst also planning to leaving a legacy for loved ones after you have gone.
However, this type or arrangement is a more expensive option than an annuity when all costs and charges are factored in. As with most investments, you ideally should have ongoing reviews to ensure you remain on track for your retirement goals and this incurs costs. There is also the (not inconsiderable) risk that if the underlying investments perform poorly, or too much is withdrawn in the early years, you could end up worse off in later retirement.