Answers · UK 2025/26

What is flexi-access drawdown?

Flexi-access drawdown lets you move part or all of your pension pot into a "crystallised" fund, take up to 25% of that portion as tax-free cash, and then draw as much or as little taxable income as you like from the rest -- with no cap on withdrawals. It replaced the older, restrictive capped drawdown from April 2015.

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Flexi-access drawdown (FAD) is the standard form of pension drawdown available to defined contribution pension savers since the Pension Freedoms reforms of April 2015, and it remains the most commonly used flexible retirement income option. **How it works** 1. You designate some or all of your uncrystallised pension pot into a drawdown fund -- this is called "crystallising" that portion. 2. You can take up to 25% of the crystallised amount as a tax-free Pension Commencement Lump Sum (PCLS). 3. The remaining 75% stays invested in the drawdown fund, and you can draw as much or as little income from it as you like, whenever you like -- there is no minimum or maximum withdrawal limit, unlike the old capped drawdown regime. **Worked example** Sarah has a £300,000 pension pot at retirement. She crystallises £100,000 into flexi-access drawdown, taking £25,000 (25%) tax-free immediately. The remaining £75,000 stays invested in her drawdown fund. She then takes £5,000/year in taxable income from it, topping up her other retirement income while the rest stays invested and can be drawn faster or slower as her needs change. **Flexibility is the key benefit** Because you choose exactly how much to crystallise and how much taxable income to draw, flexi-access drawdown allows careful tax planning -- for example, drawing just enough taxable income each year to stay within the basic-rate band, rather than triggering higher-rate tax by taking a large lump sum in one go. **Investment risk remains** Unlike an annuity, which guarantees an income for life, flexi-access drawdown keeps your remaining pot invested, meaning its value can rise or fall with markets. There is a real risk of running out of money if withdrawals are too high or investment returns are poor, particularly in the early years of retirement (sequencing risk). **MPAA trigger** Once you take any taxable income from a flexi-access drawdown fund (not just the tax-free cash), the Money Purchase Annual Allowance (MPAA) applies, cutting your future tax-relieved pension contribution limit to £10,000/year with no carry-forward, if you plan to keep working and contributing. **Death benefits** Money left in a flexi-access drawdown fund on death can usually be passed to nominated beneficiaries. If you die before age 75, it is normally passed on tax-free (subject to the Lump Sum and Death Benefit Allowance); if you die at or after 75, beneficiaries pay Income Tax on withdrawals at their own marginal rate. Pensions are also expected to fall within the scope of Inheritance Tax from April 2027 under proposed reforms -- seek current advice before relying on the historic IHT-free treatment.