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Pension Drawdown Charges

All You Need to Know About Income Drawdown Charges

Income drawdown gives those who are close to retiring a lot of flexibility to access their pension. Income drawdown allows those to access their money when they want and however much they need. The cost of pension drawdown depends on your pension provider, and it varies. (Check out all the fees before choosing a provider

How Exactly Does Drawdown Work?

Whether you have a small pension or a large pension, it doesn’t make a difference. You’ll still be able to cash out 25% without having to pay tax. All thanks to drawdown! Best of all, you can manage how often you’d like to withdraw and how much you’d like in the future.

As you might think, if there’s more flexibility, there’s always more risk involved. It’s a good idea to work out how long your funds are going to last; that is both your fixed and varied income. After that, you can look at life expectancy and market performance.

There are a few drawdown tools that can help you make a decision. These tools are there to work out how long your funds are going to last. Then, you’ll know if drawdown is the right option for you. Government-run services, like Pension Wise, are there to give guidance if you require some extra input.

Does Pension Drawdown Cost an Arm and a Leg?

As mentioned before, pension drawdown can differ, depending on the pension provider with whom you choose to work. Some charge a set fee per withdrawal, others ask for a share of your pension fund to pay for ongoing management—a few charge based on a both.

If you choose one that takes a share of your pension, this share will decrease as time goes by, because the overall size of your funds will reduce. But not always.

What Does Pension Drawdown Charges Include:

  • Admin fees or set-up fees
  • When a tax-free lump-sum withdrawal is made (up to 25%)
  • Additional withdrawal fees
  • Additional withdrawal tax (this will be charged according to your tax threshold*)
  • Exit fees or transfer fees (meaning if you have to move to a new provider if you’re setting up drawdown)
  • Ongoing fund management fees

However, it’s not limited to these listed above.

*Income Tax rates 2020-2021 (England, Wales and Northern Ireland)

Income Tax BandYour incomeIncome Tax rate
Your allowanceUp to £12,5000%
Basic Rate£12,501 – £50,00020%
Higher Rate£50,001 – £150,00040%
Additional RateOver £150,00045%

Income Tax rates1 2020-2021 (Scotland)

Income Tax BandYour incomeIncome Tax rate
Your allowanceUp to £12,5000%
Starter Rate£12,501 – £14,58519%
Scottish Basic Rate£14,586 – £25,15820%
Intermediate Rate£25,159 – £43,43021%
Higher rate£43,431 – £150,00041%
Top ratedOver £150,00046%

Before committing to any product, it’s essential to compare pension charges so that you can see which drawdown product is the best option for you. In my experience, some fee structures have benefits: advice or more investment diversity. Other products may also have additional charges and penalties for an early exit, so it’s worth researching your options thoroughly.

Drawdown Costs From PensionBee

With PensionBee’s drawdown product unlocking your pension is hassle-free, with no hidden charges. For a fair annual fee, your money will be managed and kept safe by one of the world’s most prominent money managers – BlackRock, State Street Global Advisors, HSBC or Legal & General – and made available as soon as you reach the age of 55.

PensionBee doesn’t ask for drawdown fees. The only time they do is unless you withdrawal your whole pension within the year of your first transfer. If you’ve been investing with PensionBee for not more than a year wanting to cash out in full, you’ll be charged £480. If the value of your pot is less than £480, that fee will also be charged.

Common Questions

What Are Drawdown Fees?
Is Drawdown A Good Idea?
What Is An Income Drawdown Plan?

Conclusively

If you wish to go with an income drawdown pension, you’ll have lots of freedom to do whatever you like with your funds! You can withdraw funds at any time and as much as you need! Retiring doesn’t have to be tiring.

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