Drawdown account FAQs

• Why do I have multiple drawdown arrangements?

  Drawdown arrangements are mainly for administration purposes. Each drawdown arrangement holds a value based on the amount of money you move into drawdown at one time. If you opt for partial drawdown (e.g. you don’t move the full value of your pension into drawdown) then you’ll have more than one drawdown arrangement.

  When you come to draw an income, we’ll split your requested payment proportionally across each arrangement (until the fund value depletes).

• How will my income withdrawals be taxed?

  We are required to deduct tax at source under Pay As You Earn (PAYE). The taxable income will be added to any other income received in the same tax year, so taking large withdrawals could push you into a higher tax bracket.

  When you first take a withdrawal, it’s likely that an emergency tax code will be used, which means you could initially overpay tax. After your first income payment, HMRC should provide us with an updated tax code to use for future payments. Any excess tax deducted may need to be reclaimed from HMRC directly. If you have any queries relating to your tax code, these should be directed to your local tax office. If any changes need to be made to your tax code, HMRC will inform us directly. You can also use our pension income tax calculator and emergency tax calculator to see how much tax you might pay.

• Where can I find my tax code?

  You can see the tax code we have on record through the 'Drawdown Information' tab on your online account. If you have any queries relating to your tax code, these should be directed to your local tax office. Unfortunately, we can only make changes to your tax record if contacted by HMRC directly.

• Can pension contributions continue to be made? What is the MPAA limit?

  Pension contributions can normally continue to be made if you’re in drawdown, but there may be greater restrictions. This depends on whether you’ve flexibly accessed a pension (e.g. by taking a taxable income withdrawal from most flexible drawdown arrangements, or by taking an Uncrystallised Funds Pension Lump Sum).

  Once you flexibly access a pension, you’ll trigger the Money Purchase Annual Allowance (MPAA). This means that any contributions to money purchase pension schemes, such as the HL SIPP, will be limited to £10,000 in total each tax year. Just taking your tax-free cash won’t trigger the MPAA limit.

• How can I view the bank account which is linked to my drawdown account?

  If you have online access, you can view your linked bank account online. Once logged in, select your drawdown account, followed by the ‘Withdraw money’ tab. From here you should be able to view your nominated bank account (NBA).

• What are the new allowances?

  There used to be a limit to the total value of pension benefits you could build up throughout your lifetime and generally receive up to 25% tax free. This limit was known as the lifetime allowance and was set at £1,073,100 for most people. However, on 6 April 2024, the lifetime allowance was abolished and replaced with three new allowances. These are the lump sum allowance, the lump sum and death benefit allowance, and the overseas transfer allowance.

  1. The lump sum allowance normally provides an upper limit to the tax-free amount of certain lump sums that can be taken across an individual’s pensions. This allowance is £268,275 for most people. Payments that use up this allowance include Pension Commencement Lump Sums (PCLS) and the tax-free element of Uncrystallised Funds Pension Lump Sums (UFPLS).

  2. The lump sum and death benefit allowance applies to payments that use up the lump sum allowance as well as the tax-free element of serious ill health lump sums and certain non-taxable lump sum death benefits. For most people, this allowance will be £1,073,100.

  3. The overseas transfer allowance provides a limit on transfers to Qualifying Recognised Overseas Pension Schemes (QROPS). This allowance is £1,073,100 for most people. Any value that exceeds this allowance will normally be subject to the Overseas Transfer Charge (OTC).

  To find out more about the new allowances, including how you may be affected if you used lifetime allowance under the previous rules, visit our lump sum allowance page.

• What will the new allowances mean for my beneficiaries if they inherit my pension?

  When you die your drawdown pension can be passed to your beneficiaries, in most cases free from inheritance tax.

  Like under the old lifetime allowance rules, if you die before age 75, any lump sums your beneficiaries get that are within your remaining lump sum and death benefit allowance will normally be free of income tax. If any part of the lump sum goes over your remaining lump sum and death benefit allowance, then the excess will normally be taxed as their income. If you die aged 75 or over, your beneficiaries will have to pay income tax at their marginal rate on any lump sum taken.

  Similarly, any income payments your beneficiaries get from a beneficiary drawdown or beneficiary annuity will normally be free of income tax. Unlike with most lump sum death benefits, the amount that can be inherited via beneficiary drawdown or annuity isn’t subject to the new allowances. If you die aged 75 or over, any income payments your beneficiaries get from a beneficiary drawdown or beneficiary annuity will be subject to income tax at their marginal rate.

  From 2027, where an estate is valued over the inheritance tax threshold, some pensions may be subject to inheritance tax.

• How do I nominate a beneficiary?

  You can nominate as many beneficiaries as you like and can change them at any time. The quickest way to do this is through your online account. Just go to ‘Account settings’ and ‘Manage SIPP beneficiaries’. Though these nominations aren’t binding, they do let us know your wishes, which must be considered. If you don’t have online access, you can complete an Expression of Wish form.

• Can I still buy a secure retirement income (annuity)?

  You can use the money in your drawdown account to buy an annuity at any time. A sensible approach could be to buy several smaller annuities as you grow older. This could be more beneficial than buying a large annuity all in one go, because the older you are, and the more health conditions you develop, the more income you’re likely to get. Though annuity rates depend on a number of factors.

  More on annuities

• Can I transfer a drawdown pension from another provider?

  Yes. If you have an existing drawdown pension somewhere else, you can transfer this to an HL drawdown account. If you have any questions about transferring, book a callback with one of our drawdown experts. They’ll be happy to answer your questions, no matter how big or small, to help you make informed decisions.

  More on drawdown transfers