Lessons from five years of pension flexibility


The freedom to draw directly from pension savings

The reforms, introduced back in April 2015, gave certain defined contribution pension holders “complete freedom to draw down as much or as little of their pension pot as they want, anytime they want,” according to the Chancellor of the time.

We can now draw some conclusions from experiences in both the UK and countries like the US and Australia who have had similar rules for longer, and derive some lessons for the future.

After an initial rush to fully encash pension pots, the average amount withdrawn per person quickly declined as more people engaged with flexible arrangements. If you are at the stage when you are beginning to consider your retirement, there are some lessons to learn from half a decade’s experience of pension drawdown:

  • A full withdrawal can make sense for small pension pots, even though 75% of the amount received is subject to income tax through PAYE. As the pot size increases, income tax and the operation of PAYE become much more of an issue.
  • Flexi-access drawdown is by far the most popular means of drawing from pension plans valued at £100,000 or more.However, it is probably still too early to say whether those who choose this option without taking professional advice are making a sustainable level of withdrawals.

Flexibility in law may not mean flexibility for your pension plan. Many providers of pre-2015 pensions chose not to offer all the options that legislation permits. Some only have a full withdrawal option. If you find yourself with such a plan, you may wish to seek advice about transferring to a more flexible arrangement.

Whatever you decide about managing your retirement income, do seek expert advice.



The value of your investments and the income from them can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Occupational pension schemes are regulated by The Pensions Regulator.




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The information in this article does not constitute advice and should be used for informational purposes only. This content has been provided to Helm Godfrey by Taxbriefs.