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Flexi-Access Drawdown (FAD)

When you reach retirement you have a number of options. This most popular two being: to purchase an Annuity or enter into Flexi-Access Drawdown. Either way you can take up to 25% of your fund as a tax-free cash lump sum.

When using FAD you can take income as and when you need it. There are no limits on the amount of income you can take, and you are not obliged to take any at all if you do not need it.

Whilst you do not lose the right to purchase an Annuity, you are no longer obliged to purchase an Annuity in the future either.

Potential advantages of Flexi-Access Drawdown (FAD)

  • FAD enables you to defer the Annuity option for as long as you wish, so that you don’t need to make an immediate decision about spouse’s, civil partner’s or dependent’s benefits
  • You can vary income to meet your personal requirements and manage your tax situation
  • There is a possibility of benefiting from a higher annuity rate if a lifetime Annuity is eventually purchased, either through a general increase in rates or simply by the member now being older
  • Death benefits are flexible in format and can be left to a wide range of beneficiaries
  • There is the potential to benefit from investment growth of the underlying fund

Potential disadvantages of Flexi-Access Drawdown (FAD)

  • If you did decide to purchase an Annuity in future you could find that Annuity rates have decreased
  • The fund may reduce in value due to poor investment performance or may be eroded due to investment returns not keeping pace with the level of income withdrawals

For this reason, we always recommend that FAD schemes are reviewed at least annually.