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How to choose the best drawdown provider for you

Updated 23 May 2022

5min read

Nick Green
Financial Journalist

When it comes to planning your retirement, there are many factors to consider and a wide range of products on offer. If you’re thinking of opting for pension drawdown, should you go it alone down the investment pathways route, or partner with an expert to get tailored, independent advice?

What is pension drawdown?

Pension drawdown is an alternative to an annuity. With drawdown, you can withdraw a flexible income while leaving your pension fund invested. This would be instead of using all the money to buy an annuity, which gives you a guaranteed income for a specified period. Learn more about annuities vs drawdowns here.

With drawdown, if your investments do well, your pension fund can carry on growing and potentially boost your retirement income. However, if your investments do badly, the value of your income could go down. That’s why it’s important that you choose a pension drawdown provider wisely. 

What should I be looking for in a drawdown provider?

Your current pension provider may offer a drawdown option by default. However, it’s always best to shop around or you could pay more in fees and charges than you need to. In a 2020 investigation, consumer group Which? found that the difference between the cheapest and most expensive drawdown plans for a £250,000 pension pot was a staggering £12,300 lost in charges over a 20-year period.

A good drawdown provider should:

  • Have an excellent reputation and solid track record, with plenty of positive customer reviews for things such as service and reliability.
  • Make it clear what fees and platform charges (the fee for a service that allows investors to buy and sell investments) you can expect to pay.
  • Set out how often and how much you can withdraw (so you can select a plan that meets your needs).

Be aware that drawdown providers present their fees and charges in varying ways, which can make it tricky to compare and contrast. This is where an independent financial adviser can be of real value. IFAs are likely to have detailed knowledge about different providers and how their products are structured, as well as insight into each company’s performance history – information that you can’t find out easily yourself.

Things to look closely at include:

  • Charging structures
    Depending on the provider you choose, you may incur five or six separate types of fee each year to cover set-up fees, annual administration charges, platform charges and trading fees (if dealing in stocks and shares).
  • Fees
    Some providers charge a flat annual fee, while others charge a percentage fee based on the amount you have in your pension. Some use a bundled charging approach, where investment and administration costs are combined. Fees can vary considerably from provider to provider.

How can an IFA help me find the best drawdown provider for my needs?

Making decisions about pension drawdown isn’t easy as there are so many factors to consider and an awful lot of small print to read through and make sense of. You could save yourself a lot of time and – in the long-term – money by speaking with an independent financial adviser who specialises in pensions. They’ll have whole-of-market access and can find the most suitable provider for you from all that are available – something no comparison site can do.

Of course, expert financial advice has to be paid for – and how much it costs depends on what kind of help you need. It’s important to note that IFAs are not paid by commission. If financial advice appears to be free, then you’re not dealing with an independent adviser but a salesperson.

What’s more, a financial adviser can help you save money in other ways that you may not have thought about. For instance, as well as recommending schemes and investments with lower administrative fees to save you significant costs over the long term, they can also help you save more effectively, so that your money isn’t eroded as much by tax and inflation. Importantly, they can help you avoid costly mistakes, such as buying an inappropriate financial product, losing money through an error of judgement or falling victim to fraud.

Who are the 10 leading drawdown providers?

These companies have all received positive ratings, but be aware that past performance is no guide to the future. To ensure you choose the best provider and product for you, getting independent financial advice is strongly recommended. 

  1. Vanguard
    The US investing giant only entered the UK pension market in February 2020 and its drawdown pension plan has already gained five stars from Times Money Mentor. Highlights include very low charges for money invested at 0.15%, capped at £375 per year, with ongoing pension fund charges between 0.06% and 0.80%. No additional annual SIPP (self-invested pension plan) admin fee.
  2. AJ Bell
    Its Youinvest Pension is the Which? recommended SIPP provider 2020. Its award-winning platform offers investment options including the AJ Bell fund range, ready-made portfolios and favourite funds list.
  3. Aviva
    Offers a SIPP and drawdown product that can be managed through its online portfolio service, MyAviva. There are no trading charges, which makes the charging structure simpler than many others. Aviva came top of Times Money Mentor’s customer experience ratings, meaning it excels at customer service, complaints and transparency.
  4. Interactive Investor
    Offers three types of account for pension funds: investor, funds fan and super investor, which cost £9.99, £13.99 and £19.99 a month respectively. A SIPP can be attached to any of these for an extra £10 a month. Best suited to online traders, as telephone trades cost £49.
  5. Close Brothers Asset Management
    Its SIPP has been awarded a five-star rating from Times Money Mentor, while its drawdown fee rating for this product gained four stars. Charges are less than the market average – a £60 fee for setting up drawdown and a £90 charge for adding pension funds to a drawdown account.
  6. True Potential Investor
    Portfolios blend together tried and test multi-asset strategies from world-renowned fund managers. You can take payments monthly, quarterly, half yearly or annually. Transfers allowed from final salary, defined contribution and capped drawdown pensions.
  7. PensionBee
    Transfer one or more pensions to set up your PensionBee online plan – sign up takes just a few minutes – and you can check your pension balance anytime, anywhere. Annual fee includes all fees with no hidden costs.
  8. Willis Owen Pension
    Its SIPP gives you flexibility to choose between a wide range of investment options, with funds, shares, investment trusts and ETFs (exchange traded funds that combine stocks, mutual funds or bonds), plus you can view your portfolio 24/7.
  9. Hargreaves Lansdown
    Its SIPPs have a tiered fee structure of 0.45% on the first £250,000, 0.25% on portfolios worth between £250,000 and £1 million and 0.1% on portfolios worth between £1 million and £2 million. There’s no fee to set up drawdown and you can start, stop or change your income withdrawals whenever you want, without charge.
  1. Royal London Pension Portfolio
    The fee for its managed funds and governed range portfolios is included in the core charge, with no additional fund costs. Discounts are applied based on fund size. Plans blend personal pensions with an integrated drawdown facility and a range of investment options. Plus, they can be tailored, in terms of how much you can save and when and how you can access your money.

Why is it important to get advice on the right drawdown provider?

Paying for independent financial advice is essentially an investment in your future. A financial adviser will do much more than simply tell you where to put your money. They’ll look at your circumstances as a whole – from your current situation to your medium and long-term future – to make your money work best for you and help you achieve your financial goals.

For example, when it comes to thinking about pension choices and pension providers, your adviser will take time to discuss your plans for retirement and assess your changing income needs over time. Only then will they start to recommend strategies and products. For instance, it may be the case that drawdown may not be the best solution for you if your main priority is receiving a guaranteed income throughout your retirement. An adviser will be able to guide you on this decision too.

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About the author
Nick Green is a financial journalist writing for Unbiased.co.uk, the site that has helped over 10 million people find financial, business and legal advice. Nick has been writing professionally on money and business topics for over 15 years, and has previously written for leading accountancy firms PKF and BDO.