Wojciech

Diploma for Financial Advisers
Diploma in Accounting
Member of London Institute of Banking and Finance

Pension Pot:

What it is: This is the money you’ve saved up over your working life in a pension scheme.
Accessibility: Generally, you can’t access this money until you reach a certain age, usually 55 or older depending on the scheme and regulations.
Investment: The money in your pension pot is typically invested in a range of assets to grow over time.
Taxation: You can usually take up to 25% of your total pension pot as a tax-free lump sum once you reach the minimum age.

Drawdown Account:

What it is: A drawdown account is a specific type of retirement account that you move your pension pot into when you want to start taking income from it.
Accessibility: Once your pension pot is in a drawdown account, you can take out money as and when you need it.
Investment: The remaining money in the drawdown account is usually still invested, giving it the potential to grow (or decrease) over time.
Taxation: Any money you take from the drawdown account beyond the initial 25% tax-free lump sum is subject to income tax.

Key Differences:

Flexibility: A drawdown account offers more flexibility in terms of withdrawals but comes with the responsibility of managing the remaining funds.
Tax Implications: The initial 25% tax-free lump sum is usually taken when you move your pension pot into a drawdown account. Subsequent withdrawals are taxable.
Investment Risk: Both are subject to investment risk, but a drawdown account often offers more control over how your remaining pot is invested.