Optimize Retirement: Top SIPPs for Best Drawdowns

The best SIPPs for pension drawdown offer flexibility in withdrawal options, robust investment choices, and transparent fees, with providers like Hargreaves Lansdown and AJ Bell leading for their tailored drawdown strategies and supportive guidance. Flexibility and support are paramount.
  • Last Updated: 22 Mar 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui
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Key Takeaways
  • Consider factors like fees, investment options, and customer service when choosing a SIPP for drawdown.
  • Compare SIPPs based on fees, investment options, and flexibility.
  • Look for transparency in fees, flexibility and access to a wide range of investments with SIPPs.
  • Ensure they offer the flexibility to access funds when needed.
  • Evaluate SIPPs based on fees, investment choices, and ease of accessing funds for drawdown.

When the moment arrives to figure out how to tap into your Self-Invested Personal Pension (SIPP), you may hope that you had found the best SIPP for drawdown when you started investing for your future all those years before.

According to the Financial Conduct Authority (FCA), this form of retirement income has been gaining popularity in the UK, with a recent 24% increase in the number of drawdowns—from 165,988 in the 2020/21 fiscal year to 205,641 in 2021/22.1 

This uptick underscores the importance of carefully evaluating the drawdown options offered by different providers to ensure you are not cutting your future self off from this popular way of receiving your pension.

In This Article, You Will Discover:

    At Every Investor, we are dedicated to providing pertinent, current, and reliable insights regarding the SIPP market by consulting a range of sources, such as government records, provider websites, and authoritative industry studies. 

    We rigorously fact-check and scrutinise all information before publication.

    What is the best SIPP for drawdown retirement income?

    The best SIPP for drawdown retirement income typically offers a wide range of investment options, low fees, and flexible withdrawal options.

    Look for providers with a strong reputation for customer service and solid investment performance.

    It’s important to consider your individual needs and goals when choosing a SIPP for drawdown retirement income.

    Some popular options include AJ Bell, Hargreaves Lansdown, and Interactive Investor.

    When selecting a SIPP for drawdown retirement income, consider factors such as platform fees, fund charges, and ease of use.

    Look for a provider that offers a user-friendly online portal and access to a diverse range of investment opportunities.

    Make sure to review the terms and conditions of each SIPP carefully to ensure they align with your retirement income goals.

    Additionally, seek out providers that offer tools and resources to help you manage your investments effectively.

    What Do I Need to Know About SIPP Drawdown?

    What you need to know about SIPP drawdown involves understanding the flexibility and risks associated with managing your retirement income through a SIPP. 

    Drawing down your SIPP allows you to draw funds from your pension pot while the remaining balance stays invested. 

    General Points

    When it comes to SIPP drawdown, there are a few general points to keep in mind. 

    Key features of SIPP drawdown plans include:

    • Age Requirements: You can start a SIPP drawdown typically from the age of 55, although this will rise to 57 in 2028.
    • Access to Funds: SIPP drawdown provides access to your pension pot, with the option to take up to 25% as a tax-free lump sum. The rest of the funds can be left invested and drawn as and when you need, subject to income tax.
    • Investment Control: You retain control over how your remaining pension is invested, which offers the potential for growth. However, this comes with the risk of investment volatility.
    • Income Flexibility: You have the flexibility to decide how much income to draw and when. This can be adjusted to suit your changing needs in retirement.
    • Tax Considerations: Withdrawals above the 25% tax-free portion are taxed as income. Careful planning is required to manage potential tax liabilities.

    While these features may present a beneficial solution to pensioners, there are certain risks to keep in mind.

    These include:

    • Longevity Risk: There is a risk of depleting your funds too quickly, especially if you withdraw too much too early or if investment returns are lower than expected.
    • Inflation Risk: Your pension pot needs to grow enough to keep pace with inflation to maintain your purchasing power in retirement.
    • Costs and Charges: Be aware of any fees and charges associated with managing your SIPP, as these can affect your retirement savings.

    You should also keep the following in mind:

    • Regulatory Changes: Pension rules can change, so it is important to stay informed about current regulations and how they might impact your drawdown strategy.
    • Professional Advice: Given the complexities, it is advisable to seek financial advice to tailor a drawdown strategy to your personal circumstances and ensure that you are making the most of your retirement savings.

    SIPP drawdown offers significant flexibility but requires careful management and consideration of various risks and implications.

    Investment Pathways

    Investment pathways were introduced in 2021 based on guidance by the Financial Conduct Authority (FCA).2

    Investment pathways were designed to enhance retirement outcomes for consumers accessing pension freedoms after the FCA expressed concern about consumers moving into drawdown without proper advice and holding funds in potentially unsuitable investments.

    In short

    Investment pathways are ready-made investment solutions offered by firms to non-advised customers who enter drawdown.

    Customers choose from four objectives for their retirement pot, and based on their choice, they are offered an appropriate investment solution.

    The four objectives are designed to broadly meet retirement goals, allowing consumers to maximise their income during retirement.

    The pathways, based on these four objectives, are:

    • a plan for those who do not intend to use their remaining funds within five years.
    • a plan for those who plan to set up an annuity within five years.
    • a plan for those who want to start taking an income within five years.
    • a plan for those who plan to draw all their remaining funds within five years.3

    In summary investment pathways aim to simplify choices for non-advised drawdown consumers, ensuring their pension investments align with their retirement objectives.

    What Is the Best SIPP for Drawdown?

    The best SIPP for drawdown will vary from one investor to the next based on individual circumstances, investment preferences, and retirement goals. 

    There is no one-size-fits-all answer, but there are several factors to consider when choosing the most suitable SIPP for your drawdown needs.

    These include:

    • Drawdown fees
    • Drawdown options and flexibility
    • Investment options for remaining funds
    • Reputation and client service

    Based on these considerations, we have compiled a list of potential SIPP providers to consider.

    Vanguard

    Vanguard offers a flexible income drawdown option to its SIPP investors.

    Drawdown Features

    The first thing to look at when trying to find the most suitable SIPP for drawdown in your unique circumstances is, of course, a particular firm’s drawdown offering. 

    Vanguard’s drawdown features include:

    • no withdrawal fees.
    • no minimum withdrawal amount, meaning you will not have to take your full 25% tax-free lump sum at once.
    • the option to take out the remaining 75% as and when you want.
    • the possibility of transferring your SIPP to Vanguard even if you are already in drawdown elsewhere.
    • a selection of investment pathways in which to place your remaining funds.4

    When you start drawing down, you can choose to keep investing your remaining funds actively, or you can select one of the ready-made investment pathways introduced by the FCA.

    SIPP Fees

    It is advisable to consider a provider’s general fees as well as its drawdown fees and features. 

    Vanguard’s SIPP fees include:

    • an annual 0,15%, account fee, with an annual cap of £375. 
    • no other annual admin charges.
    • ongoing fund management costs ranging from 0,06% to 0,80%.
    • fund transaction costs between 0,01% and 0,86%.
    • one-off ETF costs ranging from 0,02% to 0,46%.
    • free set-up and lump sum withdrawals.5

    Client & Industry Reviews

    Vanguard has achieved a Trustpilot review score of 4,1 out of 5 stars, with clients especially praising the company’s customer service.6

    Vanguard was named one of Boring Money’s Best Buy Pensions for 2023,7 won a Which? recommendation for pension providers in the same year,8 and made Times Money Mentor’s list of the best SIPP providers for 2024.9

    Aviva

    Aviva offers a flexible income drawdown option.

    Drawdown Features

    The features of Aviva’s SIPP drawdown plan include flexibility when accessing your retirement savings, a tiered administration fee structure and online account management.

    A quick look at these drawdown features:

    • There are no drawdown fees.
    • You will be able to switch to a different approach if you change your mind later.
    • You will be able to make single withdrawals or set up regular withdrawals.
    • You can keep your funds invested until you need to draw on them.
    • You will have to keep managing the funds that are still invested.
    • If you do not want to keep managing investments, you can opt for an investment pathway.10

    SIPP investors also have the option of purchasing an annuity provided by Aviva.11

    SIPP Fees

    Aviva does not charge for withdrawals, but remember to take note of the company’s general SIPP fees when doing your research.

    These fees include:

    • a funds or cash charge of up to 0,4% (charged on a tiered basis)
    • a share charge of 0,4%, capped at an annual £120
    • fund manager charges
    • a £7,50 share trading charge.12

    Client & Industry Reviews

    Aviva holds a public rating of 4 out of 5 stars on Trustpilot (out of over 32,000 reviews), although this score is for all the company’s services and not just for its SIPPs.13

    Aviva was listed as one of Boring Money’s Best Buy Pensions of 202314 and made Times Money Mentor’s 2024 list of best pensions for drawdown.15

    Interactive Investor

    Interactive Investor offers an income drawdown option and an Uncrystallised Funds Pension Lump Sum (UFPLS) option. 

    provides a straightforward and cost-effective approach to managing your pension, emphasising fixed monthly fees and online management.

    Drawdown Features

    A brief look at the drawdown option’s features versus those of the UFPLS option should help explain the difference between the two.

    Interactive Investor’s income drawdown features include:

    • no fee for drawing down
    • the ability to choose how much to move into your drawdown pot
    • the option to leave the rest invested and keep managing it or to select an investment pathway
    • the option to set up regular withdrawals or to access lump sums when you need to
    • the freedom to change your strategy and move more funds into drawdown or to buy an annuity or take a UFPLS.16

    Interactive Investor’s UFPLS features include:

    • no extra fee for selecting this option
    • the possibility to take a series of smaller lump sums, the first 25% of each of these sums being untaxed
    • the option to arrange lump sum payouts online.17

    As mentioned above, when you move funds into drawdown, you will have the option to select an investment pathway for the rest of your funds if you do not want to keep managing your own investments. 

    SIPP Fees

    Remember to weigh up Interactive Investor’s SIPP fees once you have looked at their drawdown options.

    These fees are:

    • a straightforward flat fee of £12,99 monthly
    • trading fees of £3,99.18

    Client & Industry Reviews

    Interactive Investor has a client rating of 4,7 out of 5 stars on Trustpilot, although this score represents the company’s entire offering and not just its SIPPs.19

    The ii SIPP was named as one of Boring Money’s Best Buy Pensions for 202320 and was a Which? Recommended provider for the same year.21

    This SIPP has also made Times Money Mentor’s list of best pensions for drawdown in 2024.22

    AJ Bell

    AJ Bell drawdown offers a structured approach to accessing your pension funds, blending transparent fee structures with flexibility. 

    Drawdown Features

    AJ Bell’s SIPP drawdown option allows clients to take a 25% tax-free lump sum and then drawdown or invest the rest as they wish.

    Other features include:

    • There is no charge for drawing down or withdrawing lump sums.23
    • You will be able to keep your remaining funds invested.
    • If you do not want to keep managing your own investments, you can opt for an investment pathway based on your future plans.

    The firm also offers investment ideas for those who may appreciate some direction when it comes to steering the remaining funds in their SIPP.24

    Options include:

    • investing in one of AJ Bell’s specially constructed funds based on whether you are looking for growth or income and how risk-averse you are
    • pick one of AJ Bell’s starter portfolios, which you can tweak before investing
    • pick funds you like from AJ Bell’s list of Favourites

    SIPP Fees

    Once you have perused AJ Bell’s investment routes with an eye to your options for drawdown, take a look at their overall SIPP fees. 

    These fees include: 

    • no set-up charges
    • a shares custody charge of 0,25% (capped at £10 per month)
    • a funds custody charge of up to 0,25% depending on the value of your portfolio
    • shares dealing charges of £9,95
    • a fund dealing charge of £1,50
    • a dividend reinvestment charge of £1,50.25

    Client & Industry Reviews

    Clients have given AJ Bell an aggregate review score of 4,8 out of 5 stars on Trustpilot, although these reviews are on the company’s products in general and not only on their SIPPs.26

    Many of these public reviews emphasise good client service received from AJ Bell’s employees.

    The firm was one of Boring Money’s Best Buy Pensions of 202327 and was a Which? Recommended provider for investment platforms in the same year.28

    AJ Bell has also made Times Money Mentor’s 2024 list of best pensions for drawdown.29

    How We Rated the Best SIPPs for Drawdown

    We rated the best SIPPs for drawdown by comparing a number of factors. 

    Our approach included:

    • Assessing fees and charges, as these are vital when considering SIPP drawdown, considering lower fees can significantly enhance returns over time. 
    • Looking at reviews of customer support and access, as these factors can significantly impact your overall experience and satisfaction and are essential factors to consider when choosing a SIPP drawdown provider.
    • Comparing account features, which distinguish great drawdown providers from average ones, like drawdown and investment options. 

    Is Professional Advice Needed for SIPP Drawdowns?

    Professional advice is often recommended when considering SIPP drawdowns owing to the complexity and long-term implications of these financial decisions. 

    While it is not a legal requirement to seek professional advice for SIPP drawdowns, there are several reasons why advice can be beneficial.

    These include:

    • SIPP drawdown involves complex financial decisions regarding investment choices, withdrawal rates, and tax implications. A financial advisor can help navigate these complexities.
    • Professional advice can provide tailored investment strategies that align with your risk tolerance and future objectives.
    • An advisor can help plan a sustainable withdrawal strategy to ensure that your pension pot lasts throughout your retirement.
    • Professional advice can help minimise tax liabilities and maximise the income you receive from your pension.
    • Financial advisors can provide guidance on how to manage investment risks, especially during periods of market volatility.
    • Pension regulations and tax laws are subject to change. A financial advisor who is up-to-date with the latest regulations can provide advice that reflects the current legal framework.
    • An advisor can assist with the ongoing process of managing and reviewing your investment strategy.
    • Knowing that a professional is managing the complexities of your pension drawdown can provide peace of mind, which is particularly valuable during retirement.

    It is important to choose a qualified and experienced financial advisor who understands SIPPs and drawdown strategies. 

    The cost of advice should also be considered, as it will impact the overall retirement budget. 

    Are There Alternatives to SIPP Drawdown?

    Yes, there are alternatives to SIPP drawdown such as annuities30 and lump sum31 withdrawals.

    An annuity might be the thing for you if you are looking for a guaranteed income for life.

    If you would prefer a lump sum, you can either take it in one go, or take smaller amounts over a long period. 

    Important

    Speak to a qualified financial advisor to discuss your options and any potential tax implications.

    Common Questions

    What are the best SIPP providers for drawdown in the UK

    How do I choose the right SIPP for drawdown

    What are the fees associated with the best SIPP for drawdown

    How can I compare different SIPPs for drawdown options

    Are there any restrictions on accessing funds with the best SIPP for drawdown

    What Criteria Should I Compare When Choosing the Best Drawdown SIPP for Me

    What Are the Drawdown Options for a SIPP

    Can I Change SIPPs for Drawdown

    What are the Tax Implications of Drawdown

    How Much Control Do I Have Over My Investments in a Drawdown SIPP

    Are There Any Risks Associated With Drawdown SIPPs

    In Conclusion

    Choosing the right SIPP for drawdown is an important decision that can help you manage your money in retirement. 

    However, it is also important to understand the risks, like the fact that your investments could go down in value or that you could outlive your savings. 

    Before making a choice, look carefully at fees, customer service, and what drawdown options will be available to you. 

    Doing your homework in the early stages can help you pick the best SIPP for drawdown, at least as far as your own priorities and preferences are concerned.

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