Flexible income
Take what you want, when you want it, through flexible drawdown
Giving you the freedom to access your money in various ways, flexible income (also known as flexible drawdown or income drawdown) lets you take regular payments, occasional payments, or a mix of both.
You can withdraw money as and when you need it. And the rest of your pension remains invested so it has the opportunity to grow over the long term[¹].
You can usually take the first 25% of your pension pot tax-free[⁴]. The remaining 75% of your pension pot moves to a flexible drawdown pot, and any withdrawals from this are taxed as income.
This option gives you full control over how you take the money from your pension pot, but careful management is needed to avoid running out of money or paying too much tax. If you’re unsure, we recommend you seek advice from a professional financial adviser.
There are no additional fees or hidden charges for accessing flexible income with NatWest Cushon.
Capital at risk. The value of your investments can go down, as well as up, and you can get back less than you invested.
There are no additional fees or hidden charges for accessing your pension with NatWest Cushon.
Why might you choose flexible drawdown?
- You want to take your tax-free[⁴] cash and have a regular monthly income that you can flexibly increase or decrease depending on your needs.
- You want to take your tax-free cash and take taxable income from your remaining pot as and when you like.
- You need your tax-free cash now but want to save your remaining pension pot to be passed to loved ones as an inheritance.
- You need some of your tax-free cash to meet other financial goals, like paying off your mortgage, but don’t need to take a regular income yet.
- You may have other sources of income that are normally enough to meet your outgoings but may not stretch to occasional larger expenditures.
What happens to your pension savings?
Taking tax-free cash from your pension
If you choose flexible drawdown, you can take all of your tax-free cash allowance in one go or bits at a time. You can usually take up to 25% of your pension tax-free[⁴], up to a maximum £268,275 across all your pension pots, and the remaining 75% is usually taxable at your marginal rate of income tax.
This means that usually for every £1 you take as tax-free cash, £3 has to go into your flexible income pot, also known as your crystallised funds. As a result, each time you take a tax-free lump sum, we’ll automatically transfer three times that amount into a new flexible drawdown pot for you. This lets you access your tax-free cash without having to take taxable income at the same time.
Taking taxable income from your drawdown pot
When you do decide to take money from your drawdown pot it will be taxed as income. You can choose to take your money as regular payments or as taxable lump sums.
Sometimes taking income can cause HMRC to apply emergency tax rates, which can mean you pay too much tax. If this happens you can claim the overpayment back from HMRC.
The rest of your pension savings will stay invested. This gives your pension the opportunity to grow over the long term[¹].
Example: Flexible drawdown
Let’s say you have a £100,000 pension pot and you’re ready to take your 25% tax-free lump sum[⁴]. You could take £25,000 tax-free, straight into your bank account.
The remaining £75,000 would move into a drawdown pot, where it stays invested. You can then take money from this pot in a way that suits you – either as one-off payments or by setting up regular payments.
Just remember, any money you take from your drawdown pot will be taxed as income, based on your total earnings in that tax year. So in this example:
You get £25,000 tax-free now
£75,000 goes into a drawdown pot
You can take flexible payments from your drawdown pot – either as one-offs or regularly
Future withdrawals from your drawdown pot are taxable
It’s a flexible option that keeps your money working for you, while giving you more control over how and when you access it.
There are no additional fees or hidden charges for accessing your pension with NatWest Cushon.
Access your pension in the Cushon app
If you are over 55 and a NatWest Cushon member you can organise your withdrawal in the Cushon app.
- Open your Cushon app.
- Tap on your NatWest Cushon pension pot.
- Tap 'More actions'.
- Tap 'Access your pension'.
- Tap 'Take a lump sum'.
- Choose desired option.
Where to find help making decisions
Financial guidance: general know-how to help you make your own decisions
Guidance is a great place to start to build your knowledge about pensions and other personal finance topics. It covers need-to-know info and tips that work for most people, but it isn’t tailored to your goals or circumstances.
If you’re comfortable making your own decisions, guidance services give you the chance to ask questions and get answers from knowledgeable experts. You can get a clearer understanding of your choices, but you can’t get a specific recommendation or advice.
You can access MoneyHelper, a free service provided by the government to provide general guidance on your pension options, by visiting the MoneyHelper website or by calling 0800 011 3797.
If you are aged 50 or over, you can also book a free and impartial Pension Wise appointment. This gives you 45-60 minutes of specialist pension guidance to help you understand your options. It can be on the Internet, over the phone or face-to-face and local to you.
Financial advice: specific recommendations from a professional adviser
Professional financial advice is different to financial guidance because it’s specifically tailored to you.
An independent financial adviser can talk you through your options, explain how they fit with your other financial products, and also make a personalised recommendation based on your goals and circumstances.
They can also work with you to set realistic goals, create a personalised financial plan that considers your specific needs, and make sure your savings, taxes and more are working together to your best advantage.
It’s not free though. If you hire a professional financial adviser, you should expect to pay a fee. You can find a list of regulated financial advisers at MoneyHelper.
Watch out for pension scams
You’d be surprised by how convincing and sophisticated scammers can be. Watch out for emails, calls or letters from businesses or strangers who claim to have a great deal for you.
Reject unexpected offers.
Know who you are dealing with.
Check any contact details.
Don’t be rushed or pressured.
Get impartial information.
For more tips and advice visit the ScamSmart website.
Stay in control with the Cushon app
Use the Cushon app to keep your pension close at hand and make it easier to plan the future you’re hoping for.
- Access your pension options.
- Set a target age for accessing your pension.
- Choose beneficiaries to leave your pension to.
- Manage your regular contributions or withdrawals.
- Find and combine[³] old pensions.
- Choose your own investments if you'd like.
We do not charge, but some pensions may charge an exit fee.
Combine your pensions
It could be hard to know what you've got to rely on in retirement if your pension savings are in multiple pots or even lost. Iris tracks down your old pots and combines them into a single pension with NatWest Cushon. Completely free of charge.
Common questions about flexible income
You can usually take up to 25% of your total pension savings tax-free[⁴], up to a maximum of £268,275.
You can choose how much tax-free cash you’d like to take, either as a lump sum or in smaller amounts over time. This tax-free amount is paid directly into your bank account. At the same time, three times the amount you withdraw tax-free is transferred into a flexible drawdown pot, where it remains invested and accessible for future withdrawals.
Any withdrawals you make from your drawdown pot in the future will be taxed as income, but you choose when and how much to take.
Example: If you choose to take £5,000 of your tax-free cash, we will pay £5,000 directly into your bank account (tax-free), and £15,000 will be moved into your drawdown pot for future use. In total, £20,000 will be taken from your pension savings pot. You can repeat this process until you have used your full 25% tax-free entitlement (up to £268,275). Any further withdrawals after this will be subject to income tax.
A tax-free[⁴] cash lump sum allows you to take up to 25% of your pension savings without paying any tax. You can take this amount all at once or in smaller portions over time. You can access your tax-free cash with our flexible income option. Each time you request a tax-free lump sum, we pay 25% of the amount directly into your bank account, and the remaining 75% is moved into a drawdown pot, where it stays invested and can be withdrawn later (subject to income tax at that point).
A cash lump sum (UFPLS – Uncrystallised Funds Pension Lump Sum) is a different option. This allows you to take a one-off lump sum directly from your pension. With UFPLS, 25% of each payment is tax-free while the remaining 75% is taxed as income in the same payment.
Key difference: With tax-free cash through drawdown, only the tax-free portion is paid to you immediately, and the rest remains invested for future withdrawals and is taxed when you access it. With UFPLS, the entire amount is paid out at once, with only part of it (25%) tax-free and the rest taxed as income straight away.
Things to consider:
If you want to take some of your tax-free cash while leaving the rest of your pension invested for the future, the flexible income (drawdown) option may suit you. This gives you greater control over when and how much taxable income you take next, potentially helping you manage your tax liability over time.
If you prefer to receive a larger lump sum in one go—and don’t mind paying some tax immediately—the UFPLS option lets you access both tax-free and taxable amounts at the same time. This could be useful if you need a bigger payout for a specific expense and are comfortable with the associated tax.
Your choice will depend on whether you prioritise ongoing flexibility.
Yes, this option provides a high level of flexibility. You can access your pension savings in stages and manage your income withdrawals to suit your needs.
You can change how you access your pension income in the future too - for example, taking money when you need it, pausing withdrawals if you wish to preserve your pension fund, or choosing to use the remaining value to buy a guaranteed income (an an annuity) at a later date.
Yes, up to 25% of your pension pot will be paid tax-free[⁴] and the remaining 75% is treated as taxable income. You may be charged emergency tax by HMRC when you draw some of your pension savings, and will need to settle any overpayments or underpayments with HMRC directly.
How you withdraw income from your pension may have tax implications and the most tax-efficient method will depend on your individual circumstances.
Large withdrawals may affect any means-tested benefits you are receiving or may be entitled to.
No, flexible drawdown does not provide an income guarantee. Although you have flexibility around how and when you use your pension savings, you will need to actively manage your finances and perform regular checks to make sure you won’t run out of money by taking your savings too quickly.
If you decide you would like a guaranteed income later on and you have sufficient pension savings left in your account, you still have the flexibility to buy an annuity, which can provide a guaranteed income.
Yes, up to 25% of your pension pot will be paid tax-free[⁴] up to a maximum of £268,275. The remaining 75% will be treated as taxable income when you take it.
If you are under 75, your pot can be paid tax-free to your nominated beneficiary, up to a limit of £1,073,100 (minus any tax-free cash you already took). Lump sum payments over this limit will usually be taxed on the recipient’s tax bracket.
If you are over 75, all lump sums will be taxed based on the recipient’s tax bracket.
At the moment, death benefits and unused pensions are not included as part of your estate for inheritance tax. However, a change announced in the Autumn 2024 Budget means that these could be liable for inheritance tax from April 2027.
Your beneficiary could be your family and loved ones or even a charity. You can tell us what you would like to happen by nominating your beneficiaries in the Cushon app.
Pension expert, Sarah, explains how we invest your money over time.
Other ways you can access your money
1. Capital at risk. The value of your investments can go down, as well as up, and you can get back less than you invested.
2. Allowances, limits and tax bands are set by the Government and subject to annual review. All information provided is based on current legislation and HMRC rules, which are subject to change.
3. You should understand the features and charges of other pensions first and seek professional financial advice if you are not sure. Check with your product provider before transferring, as there may be a penalty for leaving their scheme.
4. Some people are allowed to withdraw more than 25% tax-free cash. This is known as Protected Tax-Free Cash. This could apply to you if you have a certificate from HMRC confirming your protection or your pension has scheme specific tax-free cash attached to it.
5. You can pay in up to 100% of your net relevant earnings per year to your pension up to the limit of £60k p.a. unless you have unused allowances from the previous 3 years to carry forward, in which case your allowance may be higher. To find out more about relevant earnings and annual allowance carry forward, please see visit GOV.UK or speak to a financial adviser.
6. Source: The Office of National Statistics