Risk questions

Important: Some people may choose to access their pension earlier than planned, or because of unforeseen circumstances. This is particularly risky, as you may not be able to generate the income you need in later life as a result, and you may also miss any future increases in value should the market rise. If you have other sources of finance, depending on what these are, there may be fewer long-term risks if you access those first. There is financial support available to those who qualify. You can find out more information (including benefits you can claim and wider rules around sick pay and debt) by contacting the Money Advice Service set up by the government.

Important: How much drawdown income you get, and how long your pension lasts, will depend on how much you withdraw (particularly in the early years), the returns you achieve and how long you live. You need to review your choices regularly to keep an eye on the performance of your investments and the value of your pension. If you choose to go ahead with drawdown without taking personal financial advice, you must be confident (and comfortable) making these decisions yourself. If you're unsure about this you should seek personal advice or guidance.

Important: Having enough money to cover essential costs is a vital requirement for any retirement plan. Unlike an annuity, which provides a secure income for life, with drawdown your pension value and future income can fall due to weak investment performance or poor investment decisions. It's important to consider what other secure income sources are available to you and if you could afford to stop or limit your drawdown withdrawals if you needed to. Drawing too much income too early will also reduce your pension's value and in the worst case, you could run out of money entirely, leaving you reliant on the State. If you have other sources of finance, depending on what these are, there may be fewer long-term risks if you access those first. If you're unsure about this you should seek advice or guidance.

Important: Income from drawdown isn't secure. If you withdraw more than the growth provided by your pension investments, withdrawals may not be sustainable. Selling investments to create income increases the risk of running out of money, especially following market falls, as your investments may not have time to regain any losses. Taking just the income provided by your investments, the natural yield, carries lower risks. If you need your pension to last your entire retirement, and you plan to sell investments to generate income, you should consider if drawdown is the most appropriate option for you. If you're unsure about this, you should seek personal advice or guidance.

Important: Usually up to 25% of your pension can be paid to you tax free (up to a maximum of £268,275). With drawdown, this is as a tax free lump sum. For subsequent withdrawals, tax will be deducted via Pay As You Earn (PAYE). This is how employers deduct tax from their employees' salary. The emergency tax code is a temporary code that will normally be used when you take a taxable income from your pension for the first time (unless you have a valid P45). This code doesn't take other income into account and assumes you will receive the same amount each month, so it's likely to result in the incorrect amount of tax being deducted initially. This code will be used until HMRC provide us with your personal tax code.

HMRC may update this tax code as your tax circumstances change. If you withdraw further payments in the same tax year they should include any over or underpayment of tax to date and may result in tax being repaid. Tax codes are typically applied on a cumulative basis. This means more of your Personal Allowance becomes available as we progress through the year. The tax deducted from each income payment is determined by any tax you've already paid in the tax year, and how much of your tax-free personal allowance has already been used. You may have to reclaim any overpaid tax directly from HMRC. The tax you pay and any benefits you receive will depend on your circumstances. Tax rules can change in the future. If you're unsure about this you should seek personal advice or guidance.

Important: Shopping around allows you to compare the different options, including the benefits and risks, and services of different providers. For example drawdown can provide flexible income but this isn't secure. Other options, such as annuities, can offer a secure income for life but aren't flexible. Understanding the different options and how these work will help you choose the option that's right for your circumstances. If you're unsure about this you should seek personal advice or guidance.

Important: It's important to consider the charges associated with the option you choose when accessing your pension, including management charges and any set up fees that may apply. Most investments carry charges, and the money you ultimately receive depends on the investment returns, less any charges. The charges for drawdown in the HL SIPP are shown in the Terms and Conditions. The investments you choose may have their own charges in addition to our account charges. If you're unsure about this you should seek personal advice or guidance.

Important: Pension contributions are usually limited by an annual allowance, which for most people is £60,000 a year. This includes any employer contributions and tax relief received or due on the contributions you make. The £10,000 Money Purchase Annual Allowance limit is triggered when you flexibly access a pension for the first time. Just taking your tax-free cash entitlement, or income from an older 'capped drawdown' plan, won't trigger this limit unless you flexibly access pensions elsewhere. If you're unsure about this you should seek personal advice or guidance.

Important: Some pensions carry valuable guarantees or allowances (like a higher tax-free cash entitlement – over 25%) which may be lost once you've transferred. Depending on your provider, you could also trigger high exit fees. Before you do anything, you should check all these details with your current pension provider. If you have guarantees we suggest you seek personal advice before applying to transfer.

Important: Prices rise over time. For example, between February 2003 and February 2023, inflation saw the cost of goods and services rise by 69.3%. This means an equivalent range of goods costing £1,000 twenty years ago would typically have increased to £1,693.41. This means you might find yourself running short of money, even if the amount of income you take stays the same. If you're unsure about this you should seek personal advice or guidance.

Important: Some benefits are calculated based on how much income and capital you have - these are called 'means-tested benefits'. Capital includes money you have in your savings and investments. If you have a partner, their capital and income may also be taken into account. Means-tested benefits include pension credit, housing benefit, income support, and jobseeker's allowance. Taking money out of your pension could affect your eligibility for these benefits. You can find more details about means-tested benefits at gov.uk/benefits-calculators. If you're unsure about this you should seek personal advice or guidance.

Important: If you have an arrangement to pay your debts, your creditors may be able to take money from any pension income or lump sums you withdraw. Most pension pots aren't included as assets in bankruptcy, however if you withdraw any income or lump sums from your pot, the person or organisation appointed to manage your bankruptcy may ask you to make regular payments towards your debts from that money. They can also claim an entire lump sum you take while you're bankrupt. If you're in financial difficulty, you should take extra care before withdrawing money from your pension and seek personal advice or guidance if you're unsure.

Important: Unfortunately, investment scams are becoming more prevalent and sophisticated, which can make them harder to spot. Often fraudsters will attempt to make their 'sales pitch' as realistic and attractive as possible. They'll aim to build a rapport with you - sharing fake reviews, using convincing literature and websites or claiming to be regulated. Warning signs can include cold calling or texting, pressure to act quickly, the promise of unique or unusual opportunities, the offer of quick and easy profits or something that seems too good to be true. For pensions, scammers might also offer free pension reviews and the chance to release money from your pension even if you're under the age of 55, which isn't normally allowed under current pension legislation. You can find out more at fca.org.uk/scamsmart. If you're unsure about this you should seek personal advice or guidance.