Best pension drawdown

Find out the best pension drawdown and why it's important to compare pension drawdown providers.

Cashing out your pension isn’t simply dipping into a huge pot of money if and when you need it. You have the choice between a number of options including annuities and pension drawdown. For the average pension pot of £400,000 the difference between the most expensive and the cheapest pension is £2,120.12 per year. That could get you an all inclusive holiday for 2 adults and 2 kids in Lanzarote. Find out more about what pension drawdown is and compare the best pension drawdown for what you’re looking for.

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What is a pension drawdown?

A pension drawdown or drawdown plan keeps your pension savings invested while you take a flexible income. You must be aged 55 or over and have a defined contribution or money purchase pension to get a pension drawdown.

Pension drawdown is a lot like an annuity – you can take 25% of your pension pot tax-free, but unlike an annuity, everything else stays invested. You can then move money from your pension pot into drawdown whenever you want to.

Why should I compare pension drawdown options?

It’s a good idea to shop around to find the best pension drawdown for you, as there may be additional fees. As your pensions will need to stay invested, you will need to continue paying the personal pension or SIPP charges. There might also be setup fees or admin charges so check if your provider has these.

You might choose to go with the drawdown option that your current pension offers – a good choice if you shopped around to find your personal pension and there aren’t any additional fees for drawdown. Some pension plans don’t have a drawdown option, such as Moneybox and others, such as Nutmeg, might use a different provider for the drawdown option.

How do I find the best pension drawdown?

With pension drawdown, there’s not much that sets pension providers apart from one another except for the costs, and it’s not as simple as telling you which one is cheapest as it depends on how much you’ve got in your pot.

We’ve detailed the cheapest choices for different sized pension pots including the drawdown fees.

For smaller pensions, Legal & General offer pension drawdown at no additional charge. As your money will remain invested you’ll continue to pay the platform charge which is 0.25%.

In terms of investments, you choose between four objectives and an “investment solution” is matched to you, which is simply a ready made portfolio and a specific path you’ll follow.

Everything is explained pretty well and Legal & General have retirement agents who can be accessed over the phone to help you out.

Other fees might include a fund management charge, which is the cost to invest in a fund and will differ depending on your choices – you’ll come across this charge with any platforms that let you invest in funds.

Best pension drawdown for pensions over £100,000: interactive investor

If you want to invest more than £100,000, or have more than this in your existing pot then interactive investor is likely to work out the cheapest option for pension drawdown due to its set fee structure, rather than the approach other investment platforms use which works out a percentage of your investments. It charges £9.99 per month for its lowest account tier, plus you need to pay an additional £10 per month for the pension but that means you can set up all the other accounts like ISAs or Junior ISAs (JISAs) without paying any more. If you just want the pension, you can choose the Pension Builder plan for £12.99 per month.

It lets you invest in just about anything you like, including stocks, funds, ETFs and bonds. If creating portfolios isn’t your jam then it has a handy range of ready-made portfolios that you can choose from too.

It’s got other fees too, like fund management fees which cover the costs to invest in a fund. This differs based on your choices.

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Interactive Investor SIPP
Open your pensions account with interactive investor
  • Special offer: Pay no SIPP fee for the first six months (terms apply)
  • Retire with up to £94,000 more thanks to ii's fair, flat fees*
  • One free trade every month
  • Free regular investing
  • Choose from more than 40,000 investments
*Independent analysis by the lang cat. Go to site for details.

Best pension drawdown for ethical investments: PensionBee

If you’re a bit more conscious of your impact on the environment and want to think more about ethical investing in your pension then PensionBee could be the best pension drawdown for you.

PensionBee’s “Future World” plan aims to help you invest in companies that pledge to move to an environmentally-friendly economy. It’s actually managed by Legal & General, another of our best pension drawdown options.

It’s got one of the higher fees out of the platforms we looked at, but can you put a price on saving the world?

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PensionBee Pension
Pensions made simple with Pensionbee
  • Get total visibility of your pension
  • Combine, contribute and withdraw online
  • Protected by the FSCS
  • Your capital is at risk. You could get back less than you invest.

Best pension drawdown for stocks and shares: Hargreaves Lansdown

If you’re looking for a pension drawdown that lets you invest the rest in stocks and shares then Hargreaves Lansdown could be a good option for you. It can be more expensive than other pension providers but it has some remarkable guides and information to help you out.

It’s got a nice app to handle your trading and you can choose a pre-selected portfolio, get some suggestions on what to invest in or do it all yourself.

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Hargreaves Lansdown SIPP
Take control over your financial future with Hargreaves Lansdown
  • Pay in up to £40,000 a year and get tax relief
  • Start your SIPP from £25 a month
  • Transfer your pension from other providers easily

Pros and cons of income drawdown

Pros

  • Your money stays invested, so you still have the chance for it to grow further.
  • Have the control to withdraw money as you need it
  • It’s easier to pass your remaining pension to your loved ones when you die.

Cons

  • If the value of the remaining money left in investments falls then you lose out.
  • Your pension pot can run out.

Questions to ask yourself

There are some questions you’ll need to ask yourself when considering pension drawdown options. These include:

  • How much money do you need in retirement?
  • What are your key priorities when thinking about retirement?
  • How much risk are you willing to take?

Compare SIPP providers

1 - 6 of 6
Name Product Brand description Min investment Min monthly investment Number of funds Transfer available Offer Link
Wealthify Pension
£50
£0
10 Portfolios

Capital at risk

Platform details
NO FEE
Interactive Investor SIPP
£0
£25
3000
Get £200 cashback when you open a SIPP. Offer ends 30 April. Capital at risk. T&Cs apply. Min £15k investment. New customers only.

Capital at risk

Platform details
Hargreaves Lansdown SIPP
Hargreaves Lansdown is the UK's biggest wealth manager. It's got three different retirement options. Capital at risk.
£100
£25
2500

Capital at risk

Platform details
BONUS
Penfold SIPP
£0
£0
4 Portfolios
Bonus of up to £1000 for your pension when tranferring to Penfold

Capital at risk

Platform details
Moneyfarm SIPP
Moneyfarm has pensions that are matched against your risk appetite, goals and planned retirement date. Capital at risk.
£1,500
£0
7

Capital at risk

Platform details
AJ Bell SIPP
AJ Bell has two different pension options, a self managed pension and one that is managed for you. Capital at risk.
£1,000
£0
2000

Capital at risk

Platform details
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All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

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