4 min Read
30 Jul 2019

Written by Damien

Damien is one of the most widely quoted money and investment experts in the national press and has made numerous radio & TV appearances. He created MoneytotheMasses.com while working in the City when he became disillusioned with the way the public were left to fend for themselves because they could not afford financial advice.

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How to compare the best pension drawdown providers

In this article, we explain the costs and fees associated with pension drawdown and provide a simple comparison of the top 3 cheapest pension drawdown providers for pension pots worth £75,000, £100,000, £250,000 and £500,000.

What is pension drawdown?

Pension drawdown (sometimes referred to as 'Income drawdown') is becoming increasingly popular as it allows you to draw an income from your retirement savings while keeping the bulk of your savings invested in the markets, usually via a Self Invested Personal Pension (a SIPP), so that it can keep growing. We explain pension drawdown in more detail in our article 'What is pension drawdown & how does it work'.

How do pension drawdown fees work?

Pension drawdown in itself is relatively straightforward. The biggest barrier that exists when comparing pension drawdown providers, however, is understanding the true cost as each provider has its own charging structure.

Pension drawdown fees can be incurred in the following ways:

  • Initial set-up fee
  • Annual administration charges
  • Platform charges
  • Trading fees (if dealing in funds and shares)
  • Charges on investments you select in your drawdown pension plan

To complicate matters, providers do not stick to one specific charging structure and so while some may charge a flat fee, others may charge a fee based on a percentage of your overall pot. Where it gets even more complex is when providers charge a different fee for different bands (similar to how income tax is calculated) depending on the size of your pot. It is this complex charging structure that makes it difficult to compare providers.

Which is the cheapest pension drawdown provider?

Deciding what to do with your pension is likely to be one of the biggest financial decisions you will ever make and so you should consider seeking independent financial advice. For help choosing a reputable financial adviser, read our guide - 10 tips on how to find a good financial adviser.

The best SIPP for pension drawdown depends on the size of your pension pot. Below we have highlighted the top 3 cheapest pension drawdown providers for pension pots worth £75k, £100k, £250k and £500k. The total cost column assumes that you buy and hold your investments and don't make any fund switches.

Top 3 - Cheapest pension drawdown providers for pensions worth £75k

Company Need Advice? Annual SIPP fee Annual drawdown fee Platform Fee Total Cost
AJ Bell Youinvest No £0 £30 0.25% £218
Scottish Widows Yes £0 £0 0.30% £225
Interactive Investor No £120 £120 0.00% £240

Top 3 - Cheapest pension drawdown providers for pensions worth £100k

Company Need Advice? Annual SIPP fee Annual drawdown fee Platform Fee Total Cost
Interactive Investor No £120 £120 0.00% £240
AJ Bell Youinvest No £0 £30 0.25% £280
Scottish Widows Yes £0 £0 0.30% £300

Top 3 - Cheapest pension drawdown providers for pensions worth £250k

Company Need Advice? Annual SIPP fee Annual drawdown fee Platform Fee Total Cost
Interactive Investor No £120 £120 0.00% £240
Alliance Trust No £342 £0 0.00% £342
Halifax No £180 £180 0.00% £360

Top 3 - Cheapest pension drawdown providers for pensions worth £500k

Company Need Advice? Annual SIPP fee Annual drawdown fee Platform Fee Total Cost
Interactive Investor No £120 £120 0.00% £240
Alliance Trust No £342 £0 0.00% £342
Halifax No £180 £180 0.00% £360

What are the alternatives to pension drawdown?

Pension drawdown is just one of your options when it comes to retirement and so it is worth considering all of the alternatives. Your main options are:

  • Take small cash sums
  • Withdraw your whole pension in one go
  • Buy an annuity
  • Pension drawdown
  • Mix of the above
  • Do nothing and leave your pension pot invested

For more information, read our article What are my pension options at retirement?

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