Pension Decumulation

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Your retirement income from a pension is likely to come from one or more of the following and comes with important decisions and challenges


Pension Annuities can only be bought with money/funds held within registered pension plans/ schemes.

In practice pension annuities fall into two types

They are similar in that they provide an income for life but they have different rules.

We use the term pension annuity where the rules apply equally to the scheme pension and the lifetime annuity.

Scheme Pensions

A Scheme Pension is a pension income payable either from the scheme itself OR from an insurance company selected by the scheme.

Scheme pensions are most commonly paid directly from defined benefit schemes when a member reaches retirement.

However, it is possible for a money purchase/defined contribution pension scheme to provide a scheme pension – the important point is that the scheme member must have had an opportunity to buy a lifetime annuity from an annuity provider of their choice.

Scheme pensions must

The rules governing scheme pensions are generally more restrictive than those for lifetime annuities.


Pension drawdown is a way to retain control of the pension pot accumulated over many years. It is a way to use your pension pot to provide income by investing in funds specifically designed and managed for this purpose. Income is taxable and investment funds can fall in value.

It is a more flexible way to enjoy your pension, with up to 25% of the pension pot taken tax free. It is possible to pass the pension pot onto loved ones should you die.

There are 2 types of pension drawdown

Flexi-access drawdown – introduced in 2015, there is no limit on how much income that can be taken. WARNING – with flexibility comes the risk of taking too much income and potentially exhausting your pension pot completely so no further income payable.

Capped drawdown – unlike flexi-access income is capped at 150% of the income a healthy person of same age could get from a lifetime annuity. Capped drawdown is reviewed every 3 years as maximum income is calculated by th Government Actuarial Department (GAD).

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