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Pension drawdown rates
The following flexi-access drawdown tables assumes a pension fund of £100,000 net of the £33,333 taken as a tax free lump sum from an original fund of £133,333.
The table below is the highest annuity rates on a standard 100% joint life, level with no guarantee basis and the drawdown plan is based on a couple of the same age where the surviving partner lives to age 97. The income for drawdown is the maximum that can be taken for the fund to be depleted by 97 years of age.
The table shows the increase or decrease in annual income from a drawdown plan when compared to the highest standard pension annuity.
Fund size: £100,000 (after taking £33,333
tax free cash)
FTSE 15-year gilt yield: 1.50% (1 January 2019)
Last updated: 1 January 2019
| Annuity vs Flexi-access Drawdown |
| Age |
100% Joint
Life Annuity |
Drawdown |
More/Less |
| 55 |
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£1,510 |
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| 60 |
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£1,230 |
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| 65 |
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£1,100 |
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| 70 |
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£610 |
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| 75 |
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£760 |
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| The annual rates
shown above are based on a purchase price of £100,000
and should be used as a guide only. Pension drawdown assumes a 5.0% fund growth after charges. Pension drawdown is a higher risk pension than annuities and not suitable for everyone. For a drawdown rate specific to your circumstances you should complete
the flex-access drawdown quote. |
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As the spouse will receive the drawdown fund on death, the basis for the comparative annuity shows the spouse receiving the same benefits as the annuitant.
For the above example the annuity is a 100% joint life, level, no guaranteed period, monthly advance annuity where both the male annuitant and female dependant are the same age.
As you can see from the table the income figure for flex-access drawdown at ages 55 is £4,800, whereas at age 75, this has risen to £6,600. This is the maximum amount that can be taken out of the fund where the objective is to deplete the fund assuming the survuving partner lives to 97 years of age.
The drawdown is based on a smoothed growth with a fund growth of 4.0% after charges. Income is added to the fund on a daily basis producing low volatility.
You may find the details shown within this table very helpful but they are based on a purchase price of £100,000 and therefore should only be used as a guide.
It is likely that your own situation will be different therefore please do not assume these figures will apply to you too. As with any retirement plan there are advantages and disadvantages, and for this reason we have detailed a comprehensive list of advantages and disadvantages below which we hope will be of assistance.
What are the advantages
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Ideal for smaller funds from £30,000 and more. |
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Take your tax free lump sum now. |
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Easy access to your full fund as income or single lump sums at any time. |
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Take your whole fund as a cash sum less tax at your marginal rate. |
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Leave the fund in a secure cash fund or select a smoothed growth fund with a 5% to 6% return. |
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Low cost structures with no extra charges for withdrawals. |
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Contribute to the plan and receive tax relief at your marginal rate or £3,600 pa if you have no taxable earnings. |
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The fund, in the event of early death, can be transferred to your dependant, nominee or successor. |
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You can consider your options at any time, including a lifetime annuity, fixed term plan or any other option available. |
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You can move your fund to any other flexi-access drawdown at any time without penalty if you are offered better terms. |
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Take advantage of future product innovation offering you attractive options such as combining a guaranteed income and access to capital. |
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Avoid buying a lifetime annuity now when rates are near an all time low. |
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You do not have to give your capital away to an insurance company in exchange for an income. |
Types of drawdown
There are two types and people retiring now can only have flexi-access drawdown although capped drawdown remains:
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Flexi-access drawdown |
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Capped drawdown |
By investing in a flexi-access drawdown plan there is no limit to the level of income that can be taken but your annual allowance for making contributions is limited to £10,000 per year.
For those that remain in capped drawdown the annual allowance is £40,000 per year, however, the maximum income you can take is limited to 150% GAD.
With flexi-access drawdown there is no limit to the amount that can be taken although popular options for flexi-access drawdown are as follows:
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Take full fund - The fund can be taken over two or more years to minimise your tax liability. |
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Maximum income - Take enough each year to last your lifetime or until age 105. |
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Similar to an annuity - Match the income from a lifetime annuity. |
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£Nil regular income - Allow the fund to grow taking cash lump sums when you need it. |
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Income from drawdown can be taken monthly, quarterly, half yearly, annually or as single withdrawal when required.
Funds in drawdown can be invested in different ways such as cash, smoothed growth or fully invested and this depends on your attitude to risk and the time period you intend to leave the funds in drawdown.
The following table shows the volatility and expected return for cash, a smoothed growth fund and invested equity portfolio.
| Drawdown volatility and return |
| fund Type |
Volatility * |
Expected Return |
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0 |
0.5% |
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2 |
4.0% |
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45 |
4-5% |
| * Volatility is a measure of how value goes up and down compared to the FTSE-100 index with a volatility figure of 100. |
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Cash is low risk and currently produces low interest of about 0.5% per year, protected growth is defensive offering 4.0% per year which is added daily and fully invested is volatile falling and increasing daily but with higher potential returns of 4-5% per year.
Drawdown suitability
The following are a number of reasons why an individual would consider income drawdown rather than to purchase a pension annuity:
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Income drawdown could be attractive if an individual wishes to access the tax free lump sum but does not require a pension income, possibly because they continue to receive an income from employment. |
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If an individual is willing to accept a higher risk from pension drawdown over a longer period of time to benefit from continued investment growth, possibly because they have other significant assets and investments. |
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If an individual has alternative secure income such as a final salary pension and can afford to experience fluctuations in the income level from pension drawdown. |
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If an individual's existing pension scheme requires a spouses pension as part of the retirement benefit but the member is single, pension drawdown could be one option to consider. |
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If an individual is in poor health, income drawdown can be considered in addition to impaired health annuities to provide a pension income. |
Risks of invested drawdown
For those that take a long term view and access investments through drawdown, there are some risks when compared to the lifetime annuity as follows:
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There is no guarantee that
the individuals income will be as high as that offered
under the pension
annuity (or compulsory purchase annuity). |
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Due to the effect of mortality drag the value of the pension
fund may not achieve the required level of growth to maintain
income levels at the same level to those achieved through
the purchase of a pension annuity purchased at outset. |
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High withdrawals may erode the
value of the pension fund, if investment returns are not
sufficient to make up the balance this may reduce the amount of any potential pension annuity. |
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There is no guarantee that annuity
rates will improve in the future. They could be lower
when the individual decides to purchase their pension annuity
than the current rates. The eventual pension may be lower than
if the individual had bought a pension annuity at outset. |
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The value of the pension
fund may go down as well as up and poor investment performance could result in the individual
not having a sufficient fund available to purchase annuities equivalent to the amount they would have received
at outset. |
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You can leave the fund to your family although death benefits payable
as a lump sum that are not paid to the individual's
spouse may be liable to
Inheritance Tax. |
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Charges within an invested drawdown plan are higher than conventional pension annuities due to the requirement for regular reviews and investment advice to ensure the pension fund does not run out of money. |
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About Sharing Pensions
Sharingpensions.co.uk was created by its founder Colin Thorburn in 2001 to provide a free pensions and annuity resource to hundreds of thousands of people at retirement making their decision making easier and to select the best options.
Colin Thorburn has nineteen years experience in pensions and annuities, is an individual authorised by the Financial Conduct Authority and business is submitted through Blackstone Moregate Ltd which is authorised and regulated by the FCA (no. 459051).  |
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Call our experts
to ask questions |
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Simply speak to our pension expert Colin Thorburn if you need to discuss your options or would like us to take your details for the flexi-access drawdown quote, please contact us on: |
020 8816 7501
Monday - Friday 9am-6pm |
Calls from overseas:
+44 20 8816 7501 |
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Important details
you need to know |
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Suitable if your fund is £30,000 or more before tax free cash.
You can select a safe deposit fund or higher risk smoothed growth fund depending on your attitude to risk and time frame.
The flexi-access drawdown quote offers easy access with flexible income and you can review your options at any time. |
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