Full Flexible Access Drawdown

Published / Last Updated on 05/07/2021

Since 6th April 2015 we have all been able to take advantage of full flexible access drawdown where there is no limit to the amount you draw from your pension after age 55. 

You can choose to transfer your pension fund to another provider (or remain with your existing provider) and utilise an unsecured pension, using full flexible access drawdown. 

You would take any tax-free cash (pension commencement lump sum) at the outset and then income (if you need it) without any restriction on the amount you can take and when. 

If you want to, you can take the whole pension fund out in one go.  Only 25% would be tax free and the balance would be taxable as income in the tax year it was drawn. 

If you have taken out all the tax-free cash lump sum, then all pension money will be treated as crystallised benefits. 

Until Government changes in 2014 there was a 55% tax charge for any lump sum payments out of a crystallised drawdown pension.  Now, there is no tax charge for either crystallised or uncrystallised pension benefits, currently if death occurs before age 75. 

If death occurs after age 75 and a lump sum is paid out to a beneficiary, all money drawn by the beneficiary will be taxed at their marginal rate.  If the beneficiary continues with drawdown, then tax is also payable at their own marginal rate.

You are still able to make ongoing pension contributions whilst using flexi access drawdown.  That said, once you have triggered flexible access to the taxable part of the pension fund i.e.  the non-tax-free cash (crystallised) element you are then restricted by the Money Purchase Annual Allowance (MPAA) in the maximum new pension contribution amounts that can be paid into an investment linked pension on your behalf (by you or your employer) of just £4,000 pa gross in total.

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