Flexi-Access Drawdown option

Our Flexi-Access Drawdown option is part of our 'Flexible Retirement Plan (FRP)'. It is similar to our Pension Choices Plan in that once you move your fund across you can draw down an income. However you have access to a wider range of investments that cover a spectrum of risks and potential rewards for the money remaining in your pot. We recommend you speak to a financial adviser and, if you're aged 50 or over, you can also visit Pension Wise for free and impartial guidance.

Benefits
  • Flexi-Access Drawdown lets you take a retirement income from your pension fund and continue to benefit from any potential investment growth on the remaining fund.
  • You can choose where to invest your money from a wide range of options.
  • You have the flexibility to decide when and how to take an income as your needs change.
  • You have options to provide an income for your spouse/civil partner or dependants when you die.
  • Generally for people with larger funds or other sources of income that may be willing to take a higher degree of risk. For this reason, we have decided to offer this only through a financial adviser.
Risks and considerations
  • If you are a member of an 'occupational pension scheme', the options available to you may vary.
  • If you want to transfer out of a defined benefit scheme or you have a pension with safeguarded benefits of £30,000 or more, legislation requires you to take financial advice.
  • Your retirement income will depend on the choices you make and you should shop around to find the most suitable product for you.
  • By converting your pension to a flexi-access drawdown, you may lose any guarantee you have on your plan and restrict the amount you can invest tax-free into a future pension.
  • If investment returns are low and/or you take out too much money, you may run out and need to rely on other income. You may also not get back what you put in.
  • Tax relief will depend on your individual circumstances and is subject to change in the future. You may need to pay additional tax or reclaim overpaid tax from HMRC.

Minimum investment requirements

The minimum amount required will depend on whether you are transferring from another drawdown or pension plan, or are an existing FRP customer.

New FRP customer:

  • The minimum investment in the drawdown option is £25,000 (before tax free cash). 
  • If the initial transfer is from an existing flexi-access drawdown arrangement, i.e. a drawdown transfer, the minimum investment will be £18,750. 
  • The minimum investment in the flexi-access drawdown will be £10,000 (before tax free cash) if you are transferring at least £50,000 into a FRP.

Existing FRP customer:

  • The minimum invested in the flexi-access drawdown will be £10,000 provided the total fund in your FRP (including our Self-invested Personal Pension option) is at least £50,000. 
  • If you have a fund value of less than £50,000 in your FRP, then the minimum amount that can be invested in the drawdown option is £25,000.

Options under the Flexible Retirement Plan

Flexi-Access Drawdown was introduced on 6 April 2015 to enable you to take an unlimited amount of income payments once you have transferred your pension savings into the plan.  

Flexi-Access Drawdown replaced Capped Drawdown plans which were restricted by the number of payments that could be made.

Existing 'Capped Drawdown' plans can be retained or taken only if transferring from a Capped Drawdown arrangement set up before 6 April 2015. Restrictions apply to the amount of income that can be withdrawn for this type of drawdown.

Use Flexi-Access Drawdown to provide an income

  • You can usually take up to 25% of your savings as a tax-free lump sum when you take out a Flexi-Access Drawdown plan. 
  • You can use the remaining funds to take regular payments and/or one-off withdrawals directly from your plan. You choose how much income, if any, to take each year. 
  • You can make regular withdrawals; monthly, every three months, every six months or yearly. 
  • You can manage the income you take annually to minimise the amount of tax you pay each year.

Considerations

  • The 25% of tax free cash amount can only be taken at the start of your plan - it can’t be taken later. 
  • The remaining amount of any income payment and/or withdrawals will be subject to tax, like any other income you receive. Each payment may affect the rate of tax you pay when added to any other income for that tax year and may result in you paying a higher rate of tax. For more information, please see the Tax and Allowances page. 
  • If you take more money out of your plan as income than your plan earns in investment growth, the overall value of your fund will fall. As there is no limit on the amount of income you can take from Flexi-Access Drawdown, you need to be aware that your fund may be exhausted as a result of the income you take.

Future contributions into your pension plan(s)

If you have flexibly accessed pension benefits on or after 6th April 2015, but you want to continue to contribute to any type of pension, then your tax relief limits will be reduced. This is known as the Money Purchase Annual Allowance.

Further information on pension allowances can be read in this flyer. This is a complicated subject and you may wish to speak to a financial adviser or further information may be obtained from HMRC.

You can use the remainder of your fund to buy an annuity

At any time until your 99th birthday, you can use all or part the amount left in your Flexi-Access Drawdown plan to buy an annuity. Depending on the level of income you have taken from your plan, how your investment has performed and what annuity rates are at the time, you may receive a lower income when you come to buy an annuity. 

Of course, you can remain in your Flexi-Access Drawdown plan up until your 99th birthday. At which time, if you want to continue to remain invested, you will need to make arrangements with another provider. 

Provide an income for others

As long as it’s less than the Lifetime Allowance (£1 million in tax year 2017/18) and the scheme is notified within two years of your death your beneficiaries can do several things with the money in our Flexi-Access Drawdown plan.  For example:

If you died under 75 years of age your beneficiaries can:

  • Stay in Flexi-Access Drawdown. The income from it will be tax-free.  
  • Buy an annuity. The income from it will be tax-free. 
  • Take the money as a tax-free cash lump sum.

If you died over 75 years of age your beneficiaries can: 

  • Stay in Flexi-Access Drawdown, which is taxed as their income. 
  • Buy an annuity, which is taxed as their income. 
  • Take the money in cash, which is currently subject to income tax at the beneficiaries' marginal tax rate. 
  • Please note that anyone other than your spouse, civil partner or financial dependant must take a lump sum which will be taxable.

Please read our key features document to be aware of the full risks and benefits of this product. Please also read our technical guide.

Remember our Flexi-Access Drawdown option is only available through a financial adviser.

Our other retirement options

We offer other ways to take your pension savings, which you can find out more about below. You could also speak to a financial adviser about your options.

  • Cash options - You could take your pension pot in one go as a cash lump sum or as a series of smaller cash payments via our 'Pension Choices Plan'.

  • Pension Choices Plan - This is a personal pension that accepts transfers from some existing pension plan(s).  You cannot make regular pension contributions directly into this plan.

You can also leave your pension fund where it is and you may be able to combine these options. Find out more within our general guide to your options.

How to contact us

Advice from The Man from the Pru

Meet with a Prudential financial adviser in your area. We can review your retirement plans, advise on where to save your money and help make your finances more tax efficient. We can recommend options for you from a range of carefully selected products from Prudential and other providers.

Meet with The Man from the Pru

Talk about your options

If you're new to Prudential and looking to set up your product without needing to speak to a financial adviser, you can call our team on the number below.

0800 151 3930

8am - 6pm, Monday to Friday

Already a Prudential customer? Call us on 0800 151 3932

0800 and 0808 calls are free from BT landlines and can vary from other providers.

A pension scheme provided (sponsored) by an employer for its employees. Company pension schemes can be defined benefit schemes (final salary schemes) or defined contribution schemes (money purchase schemes).

A company pension scheme where the pension an employee receives is linked to their length of scheme service and size of their salary as defined in the scheme rules. They are often referred to as final salary schemes.

A company pension scheme where the contributions made by the employer and employee are set and the final pension an employee receives depends on a number of factors including the size of their fund on retirement. This final fund is then used to buy an annuity or an unsecured pension (income drawdown). These are also referred to as money purchase schemes.

A pension scheme provided (sponsored) by an employer for its employees. Company pension schemes can be defined benefit schemes (final salary schemes) or defined contribution schemes (money purchase schemes).

A company pension scheme where the final pension an employee receives is linked to the size of their final salary and the number of years they have been a member of the scheme. They are also referred to as defined benefit pension schemes.

Defined as cash and near cash such as bank deposits,certificates of deposits,fixed interest securities or floating rate notes, with, where applicable,a maturity date of under a year.

Important information

We are not recommending one product over another. We recommend you seek financial advice if you're unsure about what product could be right for you.

The information above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.co.uk.

Pension Wise

We recommend that you use Pension Wise, a government service offering free and impartial guidance to those aged 50 or over.  Find out how to access this by visiting www.pensionwise.gov.uk or call  0300 330 1001 to book an appointment.  This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.