Pension drawdown

chrispies2020

I am considering drawing lump sums from one of my private pensions Finding the best way to do this is quite daunting.

I am told a fee will be due if I choose to go down this route. I am 63 years old and currently not working after being made redundant last year. I have been unable to find more work, unfortunately. But as I don't currently have an income beyond interest on savings and a small pension from an ex employer, it occurred to me that so long as I don't draw amounts that go over the minimum tax threshold, any money I draw down will be tax free. Does that sound right?

What sort of fees are usual for either lump sum payments or income drawdown arrangements?

Thanks

El_Torro

A comparison site will help when looking at what fees different platforms charge. For example this one: https://www.guiide.co.uk/drawdowncostcomparer

Remember that you can always change your pension platform if you think their fees are too high.

In theory yes, you won't need to pay tax on withdrawals if you keep your withdrawals below the taxable threshold. However because of the way tax is calculated you might end up paying some tax which you later have to claim back. For example if you take out £5k in late April HMRC will assume you will take out £5k every month for the rest of the tax year and tax you accordingly.

XzavierWalnut

I am of a similar age and have 3 small pensions, 2 of which are final salary. I have to split my tax code over the 3 pensions which I do on the app, and earn well below the 1257 allowance.
I took the 25% tax free amounts out of all of them between 2023 and 2024.
Decided last year to drawdown some money from the private pension, without paying any tax. Through some research of my own, and advice from the pension company, I withdrew £1000 in June 2025 which initiates HMRC to assign a tax code to the pension.
I altered the tax code to 5000 in January 2026 and withdrew a further £4000 in February. Did not expect to pay any tax, but paid about £81. Telephoned the pension company and was advised that they have to do it that way. Not an issue as I do a self assessment and had the money returned mid April.
Pension company advised the only way to avoid paying any tax is to have monthly payments.
I would rather have the lump sums, so the nearer to the tax year end that you take it, the less tax you will pay, and need to claim back.

dunstonh

I am told a fee will be due if I choose to go down this route. 

Most providers have no fee for putting their plan into Any of the drawdown methods. Normally, the fee is charged when you use an advisor. However, there are a small number of providers that do make a charge for non-advised drawdown, and they are usually best avoided. Indeed, some of them charge more than what it would cost to use an advisor which defeats the purpose of going DIY

Who is it that's telling you there will be a fee? What is that fee for?

XzavierWalnut

https://forums.moneysavingexpert.com/discussion/comment/82029947#Comment_82029947

Just to add, I did not seek any advice from the pension company, and I did not pay any fees.

chrispies2020

Thanks all. Much appreciated.

This is a relatively small pension I am thinking of accessing to preserve my savings and larger private pensions. The provider is Aegon. I accessed their online service and although I am not clear what the charges might be (or if there are any) a fee was mentioned as I paged through my pension options.

Beyond this - if I understand correctly - small lump sum payments from the pension in question would be best arranged at the end of the tax year - probably February next year. Very helpful. Thanks :-)

XzavierWalnut

https://forums.moneysavingexpert.com/discussion/comment/82030049#Comment_82030049

Mine is Aegon also.

Albermarle

https://forums.moneysavingexpert.com/discussion/comment/82030049#Comment_82030049

Before and after you start drawdown, there will always be ongoing fees - for Aegon/platform and for the funds you are invested in.

Most providers do not charge extra for the actual drawdown/withdrawals, but some do.

Probably a good idea just to double check the details again.

chrispies2020

Thanks - yes, I got to the bottom of this. The drawdown arrangement via Aegon costs £75 per year to administer, in addition to the usual pension charges.

dunstonh

https://forums.moneysavingexpert.com/discussion/comment/82031388#Comment_82031388

Aegon are one of the few that do have a charge. In this case, it's on their Aegon retirement choices pension. It's not a particularly modern platform. It operates on the old-fashioned fund supermarket model and has software that's in keeping with that era. However, you shouldn't focus on the £75 by itself. There will be a platform charge in addition to the fund charges. Fund charges will be pretty consistent across the board, but Aegon are well known for offering discounted terms. Probably because they know their platform isn't as good as others, so they frequently offer lower terms than their default. So you should look at the total costs of the service provider and not just one part in isolation.

Albermarle

Every provider has their own way of doing things.

I have an ex workplace pot with SW ( ex Zurich). The investment fund fees are slightly higher when in drawdown, than before. The pot is not in drawdown so I have not worked out what the extra cost would be in drawdown. To be fair to them the charges are very low anyway for the funds and the platform charge ( 0.2% all in).

In fact the reason I would not drawdown this pot is not fees, but the website is poor and the customer service response very slow and not great. I think in drawdown these things matter more than when you are just accumulating the pension, so I would transfer it before starting drawdown.

OP - Aegon seem to have similar issues, so you might want to consider moving to a provider with better IT etc.