Glossary · UK
What is Flexi-Access Drawdown?
A pension income option where funds remain invested and you take variable income as needed -- triggering the £10,000 Money Purchase Annual Allowance on further contributions.
Full Definition
Flexi-access drawdown is a method of taking income from a defined contribution (DC) pension pot introduced by the pension freedoms legislation from 6 April 2015. The member designates some or all of their uncrystallised pension funds into a drawdown arrangement. The funds remain invested in the market (subject to investment risk) and the member can withdraw any amount at any time. Up to 25% of the fund designated (or the remaining lifetime allowance entitlement if relevant) is paid as a Pension Commencement Lump Sum (tax-free cash) when entering drawdown; all subsequent withdrawals are taxable as income via PAYE. Prior to April 2015, capped drawdown limited withdrawals to 150% of a GAD rate -- flexi-access drawdown removed this cap entirely. Triggering flexi-access drawdown (by taking any flexible income, not just tax-free cash) activates the Money Purchase Annual Allowance (MPAA) of £10,000 for that and all future tax years, severely restricting further pension contributions. This does not apply if only tax-free cash is taken (a designated but non-income event). Flexi-access drawdown differs from UFPLS (which does not require formal designation) and from purchasing an annuity (which provides a guaranteed income for life).