How long does pension drawdown take?

The time it takes to release money in the form of pension drawdown will vary depending on the type of pension fund and the pension provider. Processing the drawdown request isn’t the end of the journey, but it’s clear that a quick start will expedite the process. Here we look at what’s involved in administering pension drawdown and how long it takes.

The average time it will take for pension drawdown is 4 – 5 weeks to receive your lump sum. However, the length of time will vary slightly between different drawdown providers. Larger investment portfolios take longer due to the administration process.

Processing the drawdown request isn’t the end of the journey, but it’s clear that a quick start will expedite the process. Here we look at what’s involved in administering pension drawdown and how long each of the processes should take.

 

How long does it take for pension money to be paid out?

It will take between four and five weeks from the date of your pension drawdown request for your pension provider to release pension funds. You can find out exactly how long pension drawdown takes here.

Do you pay income tax on pension drawdown?

You can take upto 25% of your pension fund as a tax free lump sum.

Any money you take from your pension drawdown pot after the tax-free lump sum will be taxed as earnings in the tax year you take it. However, did you know you can claim back tax on drawdown.

What process does a financial advisor have to go through to process a pension drawdown request?

The process financial advisors follow will vary depending on the level of service they offer. Broadly speaking when you submit a pension drawdown request they will take the following steps:

1. Identify savings available

Your financial advisor will have to consider all of your savings and investment assets before being able to go any further. They’ll look at:

Cash	Pensions	ISA’s
Onshore Bonds	Property	Stocks and Shares
International Bonds	Equity Release

Their ability to gather the required information will depend on how readily you help them with that process.

2. Identify capital needs

Identifying capital needs means understanding what you will spend over and above your normal daily living costs, in the short to medium term. It will include

Home Improvements	Replacing the car	Holidays
Professional Fees	Anniversary and Birthday Presents	Educational Costs
Funeral Costs

This list is not exhaustive but gives you a good idea of what your financial advisor will need to understand.

3. Identify income needs

The process of identifying income needs means that your advisor will need to categorise your expenses.

Once capital needs and income needs have been identified, it is possible to plan for and meet these needs. Getting one step closer to pension drawdown.

4. Identify attitude to risk

Your financial advisor must conduct an attitude to risk analysis and process that report.

5. Identify suitable investment solutions

Since the pension freedoms of 2015 there has been a large increase in the number of financial products available.
Although the options remain largely unchanged the detail of the plans do change so it is a case of making sure you get the most suitable product for your circumstances.

6. Connect income sources to income needs

Your advisor will make sure that money from your pension funds and other investments will cover unforeseen expenditure with secure and guaranteed income, always looking to reduce your income tax burden.

7. Pull it all together and create drawdown

Once your financial advisor has a firm grasp on your pension savings, pension income, the decision can the be made as to whether drawdown is suitable for your individual circumstances.

As you can see there is a substantial process that you and an advisor must go through before accessing tax free cash from your defined contribution pension and other investments.

The length of time it takes to go through this process will have a direct impact on how long it takes you to access your retirement income through pension drawdown.

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Pro’s and Con’s of drawdown

Pro’s	Con’s
Take as much retirement income as you need, whether it’s regular, lump-sum, or none at all.	Your assets may lose value, reducing your retirement income. And lost retirement funds might be impossible to recoup.
Your money stays invested, allowing you to build your pension and protect it from inflation.	Your pension fund may run out, leaving you with no income
You control your pension savings and where they are invested.	Need for planning, work out your income goals and how long you need the fund to last.
You control how much money you take, reducing your tax burden.	Time consuming. You must frequently assess your investments and income strategy.
You don’t have to access your whole pension fund at once. You can also utilise some or all of your savings to buy an annuity.	Unlike annuities, which are simple. You  bear the risk of having to cover a longer time than expected.
Death benefits: You can leave your pension to loved ones (tax-free in some circumstances)	As soon as you start drawing a flexible pension income, the MPAA (money purchase annual allowance) cuts your tax-free pension contributions from £40,000 to £4,000 each year.
Drawdown can provide a better income than buying an annuity, but it is not guaranteed.	When you get your first taxable payment, it is likely to be taxed on a ‘Month 1′ basis, keeping you out of money until you file your tax return.

Their ability to gather the required information will depend on how readily you help them with that process.

How can Joslin Rhodes help me?

Joslin Rhodes can help make this process as smooth and efficient as possible.

With over 20 years experience helping people retire with confidence, we know how to get you to your vision of a perfect lifestyle in the safest and quickest way possible.

Find out how we can help you today by calling 01642 52 55 11 or simply fill in the form below and we’ll call you back.