Drawdown & annuities · Guide

What is — flexi-access drawdown?

Since April 2015, flexi-access drawdown has been the standard way to take income from a defined contribution pension while keeping the rest invested. There is no cap on withdrawals and no minimum. Here's how it works, where it came from, and what it triggers.

By Pension Bible editorial team·Last reviewed 9 April 2026·4 min read

Before and after pension freedoms (2015)

Before April 2015, options for accessing a defined contribution pension were limited. Most people either bought an annuity — converting their pot into a guaranteed income for life — or entered "capped drawdown," which allowed some withdrawals but imposed an annual limit based on Government Actuary's Department (GAD) rates.

A third option, "flexible drawdown," existed but was restricted to those who could demonstrate at least £12,000 per year in guaranteed pension income from other sources. This excluded the majority of retirees.

The pension freedoms, introduced by then-Chancellor George Osborne in April 2015, removed these restrictions. Anyone aged 55 or over with a defined contribution pension could access their entire pot however they chose: as a lump sum, as regular drawdown income, as an annuity, or any combination. No caps, no minimum income requirements.

Flexi-access drawdown became the default mechanism for those who wanted to take income while keeping the rest invested. It is now the most common way to access a defined contribution pension in the UK.

How flexi-access drawdown works

The mechanics are straightforward:

1. The pot enters drawdown. The pension holder designates some or all of their pot for drawdown. This "crystallises" that portion — meaning it becomes available for withdrawals.

2. The 25% tax-free element. Up to 25% of the crystallised amount can be taken tax-free (the Pension Commencement Lump Sum, or PCLS). This can be taken as a single lump sum upfront, or in some arrangements, each withdrawal can be treated as 25% tax-free and 75% taxable (phased drawdown).

3. Withdrawals are unlimited. There is no annual cap. A retiree can take £500 one month, £5,000 the next, and nothing the month after. Or they can withdraw the entire pot in one go. The flexibility is total.

4. The remainder stays invested. Whatever is not withdrawn remains in the pension wrapper, invested in the chosen funds. It continues to grow (or fall) with the market. No tax is due on investment growth within the wrapper.

5. Withdrawals are taxed as income. The taxable portion (everything beyond the 25% tax-free element) is added to the retiree's other income for the tax year and taxed at their marginal rate. See drawdown and income tax for the full picture on how this works in practice.

6. The pot can be inherited. If the pension holder dies, the remaining pot passes to nominated beneficiaries. If death occurs before age 75, it is typically inherited tax-free. After 75, beneficiaries pay income tax on withdrawals at their marginal rate.

Triggering the MPAA

This is the most commonly overlooked consequence of flexi-access drawdown. Taking any taxable income from drawdown triggers the Money Purchase Annual Allowance (MPAA).

The MPAA reduces the annual allowance for future contributions to money purchase (defined contribution) pensions from £60,000 to £10,000. Once triggered, it cannot be reversed.

This matters for anyone who is still working — or might return to work — while drawing a pension. A retiree who takes even a small taxable drawdown payment (say, £100) and then returns to employment can only contribute £10,000 per year to a defined contribution pension (including employer contributions), rather than the standard £60,000.

What does not trigger the MPAA:

• Taking the 25% tax-free lump sum only (without any taxable withdrawals)
• Purchasing an annuity
• Taking a trivial commutation lump sum (for small pots under £10,000)

What does trigger the MPAA:

• Any taxable withdrawal from a flexi-access drawdown arrangement
• Any payment from an UFPLS (uncrystallised funds pension lump sum) — since 75% of each UFPLS payment is taxable

The MPAA calculator models the impact on future contribution limits.

The MPAA is a particularly sharp trap for people in their mid-50s who take a small drawdown while still employed, not realising the permanent reduction in contribution capacity. Anyone considering drawdown while still contributing to a pension needs to weigh the trade-off carefully.

Capped drawdown: the old rules

Capped drawdown was the pre-2015 alternative to annuity purchase. It allowed income withdrawals up to a maximum cap set by reference to GAD rates — essentially, an amount equivalent to what an annuity on the same pot would have paid. The cap was reviewed every three years (or annually after age 75).

No new capped drawdown arrangements have been available since April 2015, but existing capped drawdown plans were not automatically converted. Anyone who entered capped drawdown before 2015 can choose to remain in it — the cap still applies, reviewed triennially — or convert to flexi-access drawdown at any time.

The advantage of remaining in capped drawdown is that it does not trigger the MPAA. The cap limits what can be withdrawn, but it preserves the full £60,000 annual allowance for future contributions. For someone still making pension contributions, this distinction can be worth tens of thousands of pounds over time.

Converting from capped to flexi-access drawdown is a one-way door. Once converted, the MPAA is triggered on the first taxable withdrawal, and the capped arrangement cannot be reinstated.

This is factual information, not financial advice. If you're unsure what's right for your situation, speak to an FCA-regulated financial adviser.