A drawdown pension can come in handy during retirement as it allows the holder to draw money from their pension pot as and when they need it. With the right drawdown pension plan, it’s possible to achieve maximum long-term growth with minimum risk. In this guide, we will be looking at the best-performing drawdown pensions available to help you make the best decision for your financial future.
Pension Drawdown Providers – Our Top Picks
Best Pension Drawdown Providers – Reviewed
If you’re not sure which drawdown pension to choose, read on for the leading drawdown pensions available now.
Best for online traders – Interactive Investor
Best drawdown pension for investing in funds and trusts – AJ Bell
Best for flexible investment options – Hargreaves Lansdown
Best for investing in ready-made portfolios – PensionBee
Best drawdown pension for low fees – Vanguard
Best drawdown pension for beginners – Charles Stanley Direct
Best for investing in funds – Aviva
1. Interactive Investor – Overall Best Drawdown Pension Provider
Monthly fees | £12.99 |
|---|---|
Withdrawal fees | £0 |
Investment options/plans | ETFs, investment trusts, and shares |
Minimum investment | £0 |
FSCS protection | Yes |
FCA regulation | Yes |
Interactive Investor provides a Pension Builder plan specifically designed to make pension pots more flexible and affordable. The plan costs £12.99 per month, and customers with an existing ISA or Trading Account can add a SIPP for an extra £10 a month.
Purchasing and selling shares and funds on the platform usually incurs a transaction fee of £5.99, while withdrawing funds from the pension pot comes at no additional cost.
For those who prefer to trade over the telephone, Interactive Investor imposes a £49 fee per transaction, making it more suitable for those who trade online. If there is insufficient cash in the account to cover fees, they will sell holdings in order to make up any outstanding balance but charge an additional administrative fee of £25.
- No withdrawal fees
- Charges a flat fee (and not a percentage) which keeps costs predictable
- No minimum investment
- Buying shares and funds comes at a £5.99 fee
- There are fees for adding a SIPP to any existing plan you have
- There is no free plan as SIPP costs £12.99 a month
2. AJ Bell – Best Drawdown Pension for Investing in Funds and Trusts
Annual fees | 0%–0.25% |
|---|---|
Withdrawal fees | £0 |
Investment options/plans | Investment trusts, gilts, ETFs, and bonds |
Minimum investment | £1,000 lump sum |
FSCS protection | Yes |
FCA regulation | Yes |
With over 460,000 customers, AJ Bell is a renowned provider of pensions and investments that has been in existence since 1995. Opening an AJ Bell self-invested personal pension (SIPP) is completely free, with investments costing as little as £1.50.
When it comes to pension drawdown, there are a few fees associated with this service. Taking a one-off payment from your tax-free lump sum or income payments will cost you £25 per drawdown fee. Meanwhile, regular drawdown payments or lump sums will incur an annual service fee of £100.
If you're investing in shares such as investment trusts, ETFs, gilts and bonds, then there will be an annual custody charge of 0.25% of the value of the shares in your account, capped at £10 per month. Funds, including unit trusts, OEICs, and structured products, have an annual custody charge of 0.25% on the first £250,000 and 0.10% on the value between £250,000 and £500,000.
- No minimum fund required for drawdown
- Provides access to multiple investment trusts and funds
- No fees for transferring pensions
- Annual fees apply
- Investing in funds costs £1.50
| Name | Score | Visit | Support | Mobile | Security | Commission | Disclaimer | |
|---|---|---|---|---|---|---|---|---|
 | 7.9 | Visitajbell.co.uk | Phone, Live Chat, Email | Android, iOS | 2FA, Biometrics |
3. Hargreaves Lansdown – Best for Flexible Investment Options
Annual fees | 0.1% –0.4% |
|---|---|
Withdrawal fees | £0 |
Investment options/plans | SIPPs, stocks and shares ISAs, cash ISAs |
Minimum investment | £100 lump sum or £25 monthly |
FSCS protection | Yes |
FCA regulation | Yes |
Since its founding in 1981, Hargreaves Lansdown has become one of the most well-known providers, offering ISAs, pensions, investments, financial advice, and share dealing services.
For pension drawdown specifically, Hargreaves Lansdown offers a fee structure based on the size of your portfolio. You will be charged 0.45% on the first £250,000 invested, 0.25% for portfolios between £250,000 and £1 million, 0.1% for those between £1 million and £2 million, and no fee for portfolios over £2 million.
The automatic reinvestment feature is also a nice addition that allows you to set up periodic reinvestments into your funds at no additional cost. This, coupled with the DIY approach, makes it a flexible option for investment-savvy pensioners.
- Extensive educational and news content
- DIY approach helps investors customize and personalize their pension portfolio
- Thousands of assets to choose from
- Annual fee of 0.1%–0.4%
- Minimum investment of £100 lump sum or £25 monthly
4. PensionBee – Best for Investing in Ready-Made Portfolios
Annual fees | 0.5%–0.95% |
|---|---|
Withdrawal fees | £0 or £150 for early withdrawal |
Investment options/plans | Eight different options |
Minimum investment | £0 |
FSCS protection | Yes |
FCA regulation | Yes |
PensionBee provides a hands-off approach to retirement planning and investing. The platform provides eight plans to choose from, making it suitable for those who want ready-made portfolios. Here are some examples:
What it invests in | Who is it suitable for | |
|---|---|---|
Tracker | Shares and bonds around the world | Anyone who wants a ‘set and forget’ approach to investments |
Tailored | Different assets tailored to the age group of the pensioner | Anyone who doesn’t want to manually adjust their investments as they age |
Fossil fuel free | Different sectors, excluding tobacco and fossil fuel | Those who wish to invest in line with the UN Global Compact |
Pre-annuity | Bonds that fairly correlate with annuities | Anyone who plans to use their pension to purchase an annuity |
To get started, simply enrol, and choose between initiating a new pension account or transferring over an existing one. Next, select from a range of investment plans investing in different assets with different risks and returns. Once that's done, PensionBee's team will take care of the rest, managing both pension transfers and investments.
Note: You will be charged a withdrawal fee if you withdraw all of your pension within 12 months of having a live balance. Or, if your account balance is less than £150 at the point of withdrawal.
- Ready-made portfolios suitable for hands-off investing
- Eight unique packages to choose from
- No fees for transferring pensions
- No minimum investment
- An annual fee applies
- A withdrawal fee will be charged in some situations
| Name | Score | Visit | Disclaimer | |
|---|---|---|---|---|
 | 6.0 | Visitpensionbee.com |
5. Vanguard – Best Drawdown Pension for Low Fees
Annual fees | 0.15% |
|---|---|
Withdrawal fees | £0 |
Investment options/plans | Equities, bonds, ETFs, mutual funds, and ESG funds |
Minimum investment | £500 lump sum or £100 per month |
FSCS protection | Yes |
FCA regulation | Yes |
Vanguard, one of the oldest investment and pension providers, offers a range of competitive pensions that combine the versatile DIY approach with ready-made pension plans. With Vanguard, you can choose to build your own pension portfolio or select from one of the ready-made funds.
You can build your portfolio by choosing from 38 equities, 28 bonds, one money market, three multi-asset equities, 29 ETFs, 49 mutual funds, and 17 ESG funds.
The ready-made funds are either target retirement funds or life strategy funds. The target retirement fund lets Vanguard invest your money in shares and bonds, the ratio of which is based on your retirement date. The life strategy fund is a more diversified and long-term approach suitable for those who don't plan on retiring soon.
The annual fee sits at 0.15% and is capped at £375, making it one of the lowest in the industry. There are no fees for transferring your pension, making withdrawals, or switching funds.
- No minimum fund required for drawdown
- Low fees capped at £375
- Multiple assets to choose from
- No drawdown fees
- There is an ongoing cost of 0.22%–0.24% for asset management
- High minimum investment of £500 lump sum or £100 per month
| Name | Score | Visit | Disclaimer | |
|---|---|---|---|---|
 | 6.0 | Visitinvestor.vanguard.com |
6. Charles Stanley Direct – Best Drawdown Pension for Beginners
Annual fees | 0%–0.35% |
|---|---|
Withdrawal fees | £0 |
Investment options/plans | Equities, bonds, funds, and shares |
Minimum investment | £0 |
FSCS protection | Yes |
FCA regulation | Yes |
Charles Stanley Direct is a direct-to-consumer investment management company founded in 1792, making it one of the oldest financial firms on the London Stock Exchange. Here, you can set up a SIPP with three main strategies.
Direct Investment Service – This allows you to choose how to plan and grow your pension without financial advice from a professional. There is no minimum deposit when taking this approach.
Bespoke Investment Service – This plan puts the investment decisions in the hands of professionals tasked with growing and managing your funds. The minimum investment is £200,000.
Advisory Investment Services – This takes a hybrid approach, letting you get as much or as little assistance from professionals. The personalized guidance provided makes this plan beginner-friendly, and the minimum investment is £200,000.
For funds worth up to £250,000, the platform fee is 0.35%, for funds between £250,000 and £500,000, it's 0.2%, and for those between £500,000 and £1 million, it's 0.15%. Funds worth between £1 million and £2 million are subject to a 0.05% platform fee, with all funds worth over £2 million being free of charge.
- Provides personalized professional guidance
- There are various investment options available
- Online direct investment is only free for clients with over £30,000 in combined assets
- Higher fees for telephone direct investment service
- High minimum deposit for some account types
| Name | Score | Visit | Disclaimer | |
|---|---|---|---|---|
 | 7.0 | Visitcharles-stanley.co.uk |
7. Aviva – Best for Investing in Funds
Annual fees | 0.25%–0.4% |
|---|---|
Withdrawal fees | £0 |
Investment options/plans | Funds, stocks, and shares |
Minimum investment | £25 a month or £500 lump sum |
FSCS protection | Yes |
FCA regulation | Yes |
Aviva's SIPP and drawdown product can be managed through its online portfolio service, MyAviva. It offers customers a convenient way to buy and sell funds without incurring any trading charges, making the pricing structure simpler than many other products on the market. There are two ongoing charges associated with this product, a platform fee and a fund management charge.
The platform fee is tiered depending on the value of the customer's pension account. For balances up to £50,000, the fee is 0.4%, which works out as a £200 annual charge. For amounts between £50,000 and £250,000, it falls to 0.35% (£700), while for amounts above £250,000, it’s further reduced to 0.25% (£625). After £500,000, there is no additional fee charged.
There are several ways to invest in funds, such as investing in ready-made funds provided by Aviva or choosing to build your portfolio yourself. If you opt for the latter, you can build from scratch or select from Aviva’s hand-picked funds.
- Multiple investment strategies available
- Extensive online resources
- Free investment advice from professionals
- Minimum investment of £25 a month or £500 lump sum
- Up to 0.35% platform fee
| Name | Score | Visit | Disclaimer | |
|---|---|---|---|---|
 | 8.0 | Visitaviva.co.uk |
How We Rate and Review Providers
While looking for reliable drawdown pension providers, we considered a number of factors to make sure our selection is the best it can be. We looked at fees, account perks, investment options, regulation and insurance and customer service as key indicators when reviewing and picking sites.
Fees – We carefully reviewed the different types of fees that some drawdown pension providers charge, such as trading, annual maintenance, and exit fees, to determine which ones offer the lowest cost option. From withdrawal fees to management fees, we made sure that the providers listed here offer competitive pricing.
Account Perks – We examined the different account perks offered by each of the pension providers on our list to make sure they provide a truly valuable experience for their customers. These include features like tax-free transfers, flexible contributions and withdrawals, access to independent financial advice, and more.
Investment Options – When choosing between drawdown pension providers, we looked at which ones offer a wide range of investments, such as stocks, bonds, mutual funds, and ETFs from reputable companies, so that customers can diversify their portfolios and optimize returns.
Regulation and Insurance – We made sure that all of the drawdown pension providers on our list are regulated and insured by the Financial Conduct Authority (FCA) so that customers can rest assured their investments are in safe hands.
Customer Service – We took the time to review customer service ratings and reviews for each provider so that we could select those that offer reliable and helpful support when needed. We also looked at whether there was a phone line, email, or live chat available for quick resolution of any queries.
What is a Drawdown Pension?
A drawdown pension is an arrangement where you take money from your pension pot while it remains invested, rather than taking all of it as a lump sum. This arrangement allows you to still receive tax relief on contributions made, which can be beneficial for long-term savings.
Drawdown pensions are convenient and flexible and can provide a steady, guaranteed income while still keeping your money invested in the markets. They are also typically more tax-efficient than other pension payment options.
How Do Drawdown Pensions Work?
Think of drawdown as a ‘pot’ or account where your pension savings are stored, which you can then access by taking regular payments out. You are able to choose how much money you want to take out and when.
To access a drawdown pension, you must meet certain eligibility requirements set by the HMRC. Generally, these include being aged 55 or over and having saved into a qualifying pension scheme. It's important to check with your provider, as different providers may have their own eligibility criteria.
Types of Drawdown Pension
There are two main types of drawdown pension: flexi-access and capped drawdown.
Flexi-access allows you to take up to 25% of your pension pot as a tax-free lump sum, with the rest available for regular withdrawals. This is known as a 'flexible income drawdown' and comes with no limit on how much money you can take out. Here, you start by taking up to 25% of your pension as a tax-free cash lump sum up-front. Afterwards, the taxable balance is moved into a drawdown account where you can take regular withdrawals.
Capped drawdown, on the other hand, lets you access your pension pot within certain limits. Here, the amount you can take out of your pension is restricted each year, based on your age. This can be a good option for those who want to draw an income from their pension but don’t need as much cash as flexi-access allows. The maximum amount you can take out is capped at 150% of the equivalent annuity rate.
Pros and Cons of Drawdown Pensions
Drawdown pensions offer numerous advantages. However, there are some drawbacks to consider before opting for this option.
- You can access your pension pot as and when you need it – Drawdown pensions give you the flexibility to decide how much money you want to take out of your pension, and when. This means that you are in control of selecting an appropriate withdrawal strategy for your circumstances, making drawdown suitable for those with unpredictable financial needs.
- Access up to 25% of the money tax-free – With drawdown pensions, you can usually access up to a quarter of your pension pot as a lump sum, free from income tax.
- Your pension pot remains invested –Drawdown pensions allow you to keep your money invested and benefit from potential growth in the value of your investments over time.
- You don’t have to buy an annuity – Instead, you are able to take control over how much money is taken out each year and where it’s invested, allowing you flexibility in retirement planning.
- You still need to pay tax – Although you can take up to 25% of your pension pot as a lump sum tax-free, any money taken out after that is subject to income tax.
- Your retirement fund is not protected against market downturns – As your pension remains invested in the stock market, it cannot be protected against potential losses which could affect its value and reduce the amount available for withdrawals or future investment choices. You should therefore consider an appropriate risk management strategy to protect yourself from market volatility.
- There may be additional costs – Drawdown pensions usually come with associated fees and charges, such as adviser fees. It’s important to be aware of these costs before opting for this option.
- You could outlive your pension pot – If you select an overly aggressive investment strategy or take money out too quickly, there is the risk that you could outlive your pension pot.
Pension Drawdown Tax Rules
Once you have withdrawn the 25% tax-free lump sum, withdrawals from drawdown pensions are treated as earned income and taxed in the same way as wages or salary. This means that if you take an income from your drawdown pension, you will have to pay tax on it at your marginal rate.
The amount of tax paid depends on how much money is taken out each year. For example, any withdrawals under the personal allowance of £12,570 will be tax-free. Here's a summary of the different tax bands.
Taxable income | Tax rate | |
|---|---|---|
Personal allowance | Up to £12,570 | 0% |
Basic rate | £12,571 to £50,270 | 20% |
Higher rate | £50,271 to £125,140 | 40% |
Additional rate | over £125,140 | 45% |
What Happens to Your Drawdown Pension If You Pass Away?
In the event of your passing away (before 75 years), any money that remains in your drawdown pension will usually be inherited by your spouse or other beneficiaries. The amount of inheritance tax payable will depend on the size of the pension fund and the age at which you passed away.
If you pass away before taking all of the money out of your pension, a lump-sum death benefit will be paid to your beneficiaries. This can be withdrawn tax-free within two years, after which taxes will be charged.
However, if you die after your 75th birthday, your beneficiaries will need to pay income tax on any pensions you leave behind.
If you have a defined benefit pension (which is often linked to your salary or earnings), the fate of your pension depends on whether or not you were retired before death. If you pass away before retiring while below age 75, your pension will be paid to your beneficiaries tax-free.
How to Find the Best Drawdown Pension in 2024
Finding the best drawdown pension plan for your individual circumstances can be a tricky process. Here are some tips to keep in mind when evaluating drawdown pension plans.
Look into the investment options available
Different pension plans have their own investment offerings, including trusts, bonds, stocks and shares, and more. The first step to finding the best option for your needs is to understand what investments are available and how they will perform over time.
It's important to consider your own risk appetite when making decisions about which platforms to choose. Penny stocks tend to be volatile, while bonds may be more secure but offer lower returns.
Are the investments ready-made or DIY?
Many drawdown pension plans allow you to choose between ready-made investments or DIY investing. Ready-made options offer the convenience of pre-set portfolios, but you may not be able to customize your portfolio as much as with DIY investing. DIY investing gives you more control over your investments, but it can also require more time and effort.
Fees and charges
When choosing a drawdown pension plan, make sure to consider the fees and charges associated with the plan. Many drawdown pensions charge an annual management fee that is deducted from your account balance each year, so it's important to compare fees across different providers before making a decision about which one is best for you.
Additionally, you should consider any exit, setup, or transfer fees that can add up over time.
Accessibility and flexibility
Drawdown pensions vary in terms of accessibility and flexibility. Some drawdown pension plans allow for regular withdrawals or lump-sum transfers, while others may limit how often you can access your money. There could also be terms like minimum deposits and withdrawals, which can influence how you grow and manage your pensions.
When evaluating options, make sure to consider the level of accessibility and flexibility that each plan offers so that you can choose one that best meets your needs.
Account features
The features associated with a drawdown pension plan are important to consider. One feature to look out for is automatic reinvestments, which will help you to build your pension without having to actively manage it.
Additionally, check whether there are any additional account features, such as tax-deferred growth or age-based withdrawal limits, that can help you make the most of your drawdown pension plan.
