ii SIPP

SIPP income drawdown

Q: How much income can I take from my pension pot?

One of the advantages of drawdown is that you can choose how much income you want to withdraw at any time. You can choose to make regular withdrawals, or take larger sums as and when you need them. As with any other pension, any income you take will be subject to income tax (not including the initial tax-free lump sum). This may include higher-rate tax if you go over the threshold in the tax year.

Q: What happens if I die before my pension runs out?

If you die before the age of 75, the remaining pension can be passed on tax-free to any beneficiary, as a lump sum or drawdown pension. If you die after the age of 75: The pension can be drawn down or passed on at the beneficiary's marginal tax rate Alternatively, it can be paid into a trust as a lump sum, minus a 45% tax charge.

Q: Can I still pay into my pension if I am in drawdown?

Yes, you can continue to contribute - although your annual allowance is reduced to £4,000 once you start taking a taxable income from your pension. This is known as the Money Purchase Annual Allowance (MPAA) .

Q: Do I have to move my whole pension into drawdown?

You don't have to move your whole pension into drawdown. You can choose to move it into drawdown gradually, leaving the rest invested. Alternatively, you could move part of your pension into drawdown and use the rest for something else – such as UFPLS or an annuity .

Q: How old do I need to be to apply for pension drawdown?

You must be at least 55 years old to apply for pension drawdown. From 2028, the age increases to 57. As long as you are over 55, you do not have to be retired to begin receiving drawdown income. For example, you can use it to supplement your income if you wish to go into semi-retirement.

Take up to 25% of your pension tax-free, and set up regular or one-off income payments for the rest.

What is drawdown?
How to use drawdown with your ii SIPP
Learn more about drawdown
Pay no SIPP fee for 6 months

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Transfer your pension

Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.

What is drawdown and how does it work?

Drawdown, also known as flexi-access drawdown, is a flexible way of withdrawing money from your pension. You can take some or all of your pension this way.

You’ll start by moving your chosen amount into a drawdown pot. You may have seen this described as a drawdown arrangement, or crystallised fund.

The first 25% can be taken as a tax-free lump sum.

The rest of the drawdown pot is taxed like normal income when you withdraw it. You can:

Set up regular withdrawals (e.g. monthly)
Or take lump sums as and when you need them.

The money in your drawdown pot remains invested.

Drawdown: a simple example

Sarah has £400,000 in her pension. She chooses to move £100,000 into a drawdown pot, leaving £300,000 in her non-drawdown pot.

She takes the first 25% (£25,000) as a tax-free lump sum.
She decides to take the remaining £75,000 in monthly withdrawals of £1,000 - which are subject to income tax.

She can take more money from her pension at any time - even before her drawdown pot has run out.

For example, she could move more money into drawdown, or choose another option such as UFPLS or an annuity.

How to use drawdown with your ii SIPP

There are no charges for taking an income from your pension. It's all covered by your monthly SIPP fee.

Move funds into drawdown

You can move some or all of your SIPP into a drawdown pot and take a tax-free lump sum using your online account.

At the same time, you will be able to set up single or regular income withdrawals.

You will need to do this whether you are moving into drawdown for the first time, or moving further funds into drawdown. Learn more

Change your existing drawdown arrangement

If you want to set up, change or stop income withdrawals from an existing drawdown arrangement, this can be done using your online account.

Requesting a one-off payment from your drawdown arrangement

You can request a one-off taxable payment from an existing drawdown arrangement online. Learn more

Capped drawdown

This is only available if you have already moved into capped drawdown. You can have a mix of capped and flexi-access drawdown pots in your SIPP.

If you would like to move further funds into capped drawdown, you will need to download and complete a Taking Pension Benefits Capped form.

If you want to set up, change or stop income withdrawals from an existing capped drawdown pot, complete a 'Starting or amending income payments for capped drawdown' form.

Investing in drawdown

When you move funds into drawdown with your ii SIPP, you will need to decide how you want your fund to be invested in the future.

You can continue to choose your own investments, or you can choose from our four Investment Pathways.

These are selected by our experts to match four common goals people have when moving funds into drawdown. They also offer excellent value for money.

Learn more about Investment Pathways

Learn more about drawdown

How is drawdown income taxed?

The first 25% of each amount moved into drawdown can be taken as a tax-free lump sum. The remaining amount is taxed like a normal income when you receive it:

If you have no income from any other sources, the first £12,570 per year is tax-free.
20% on annual income between £12,571 and £50,270.
40% on annual income between £50,271 to £150,000.
45% on annual income above £150,000.

Important: Month 1 emergency tax code

When you first take a taxable income from your pension, you may be assigned a 'Month 1' emergency tax code. This could result in a tax overpayment in the first month. If so, you can claim this back from HMRC.

How much income can I take from my pension pot?

What happens if I die before my pension runs out?

Can I still pay into my pension if I am in drawdown?

Do I have to move my whole pension into drawdown?

How old do I need to be to apply for pension drawdown?

How can Pension Wise help?

If you have a defined contribution pension scheme and are 50 or over, then you can access free, impartial guidance on your pension options by booking a face to face or telephone appointment with Pension Wise, a service from MoneyHelper.

If you are under 50, you can still access free, impartial help and information about your pensions from Moneyhelper.

Find out more

What are the alternatives to drawdown?

Lump sums (UFPLS)

A flexible way to take your pension income, as and when you need it. Learn more

Annuity (with another provider)

Get a guaranteed income in return for some or all of your pension. Learn more

New to ii?

New customers who open a SIPP before 31 May will pay no fee for six months – a saving of £12.99 a month. Terms apply

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Already an ii customer?

Add a SIPP to your account before 31 May and we’ll waive the £10 per month SIPP admin fee for six months – saving you £60. Terms apply

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