Annual Drawdown Review: What to Assess and When to Adjust

Taking your pension into flexi-access drawdown is not the end of the planning process — it is the beginning of a different, ongoing one. Unlike an annuity (which requires a single decision, then pays income automatically for life), a drawdown pension requires active management. Income levels, investment allocation, withdrawal strategy, and beneficiary arrangements all need regular review to remain appropriate.

The FCA's rules for regulated drawdown advice explicitly require that advisers who recommend drawdown must agree a review policy with clients, including the minimum review frequency. For self-directed drawdown investors — those managing their own SIPP without ongoing advice — the discipline of an annual structured review is even more important, because no one else is checking whether the plan remains on track.

This guide sets out what a thorough annual drawdown review should cover and what action the findings might prompt.

1. Sustainable Income Assessment

The central question of any drawdown review is: at the current withdrawal rate, is the pension pot likely to last as long as I might live?

This requires more than simply checking the fund value against the withdrawal amount. A proper sustainable income assessment considers:

The current withdrawal rate. Divide your annual gross withdrawal by the current fund value. If this ratio has risen significantly — because the fund has declined in value while withdrawals have continued — you may be on an unsustainable trajectory. A rate that started at 3.5% when the fund was £1m may now represent 4.5% or 5% of a depleted £700,000 fund.

Remaining investment horizon. The appropriate withdrawal rate depends on how long the fund needs to last. An 85-year-old drawing from a £500,000 fund has a materially different sustainable rate than a 65-year-old with the same fund. Update your longevity assumptions annually — actuarial cohort life tables are updated regularly by the ONS.

State Pension and other income. Has anything changed in the other income sources that underpin your overall spending? Has the State Pension increased (through the triple lock or otherwise)? Has a DB pension come into payment that changes how much drawdown income you need?

Health changes. A significant change in health — the development of a serious condition — may affect both expected longevity (potentially allowing higher sustainable withdrawals) and expenditure needs (care costs can be substantial). Health changes also raise the question of whether an enhanced annuity for part of the fund would now be appropriate.

If the sustainable income assessment reveals an unsustainable withdrawal rate, the review should identify whether the solution is to reduce withdrawals, adjust investment strategy for higher expected return (with corresponding higher risk), consider partial annuitisation, or accept a higher probability of depletion.

2. Capacity for Loss Review

Capacity for loss is a formal regulatory concept: it refers to your ability to absorb a fall in the value of your investments without this having a materially detrimental impact on your standard of living. In drawdown, this is a live and ongoing assessment — not a one-time answer at the point of entering drawdown.

Capacity for loss in drawdown changes over time in ways that capacity for loss in accumulation does not. Consider:

• As you age and your remaining time horizon shortens, recovery from large market losses becomes less possible.
• If your spending has been higher than expected (or income from other sources lower), your dependence on the drawdown pot increases — reducing capacity for loss.
• If the pot has grown strongly and you now have more than you need for your expected retirement, your capacity to absorb a loss without changing your lifestyle may have increased.

Each annual review should ask: given where the fund is today, my expected remaining years, and my other income, can I tolerate a 25–30% fall in portfolio value without it materially affecting my standard of living? If the honest answer is no, the portfolio allocation may need to be de-risked.

This is not an argument for always de-risking. A drawdown investor who de-risks too early may face a different risk — the portfolio failing to keep pace with inflation over a 25-year retirement. The review should find the appropriate balance.

3. Investment Performance Review

Check whether each fund or asset class within the drawdown portfolio has performed in line with expectations — not expectations in absolute return terms (which are uncontrollable), but in terms of risk behaviour:

• Did equity funds fall by approximately as much as the market in bad months? If they fell materially more, is the additional risk justified?
• Did defensive or bond allocations behave as expected — providing some cushion in volatile periods?
• Are any funds persistently lagging their benchmark or peer group over three or five years, net of charges?
• Has the portfolio's overall asset allocation drifted significantly from its intended strategic allocation (due to differential performance of asset classes), and does it need rebalancing?

Rebalancing — selling some of the assets that have grown to above their target weight and using the proceeds to top up under-weight assets — is a mechanical discipline that maintains the intended risk level and can modestly improve long-term returns. It also provides a natural mechanism for taking drawdown withdrawals from the best-performing assets, locking in gains.

Do not make fund changes based solely on one year's underperformance. But persistent underperformance relative to a relevant benchmark, sustained over three or more years, is a legitimate reason to switch.

4. Beneficiary Nomination Review

Pension death benefits in a flexi-access drawdown plan are payable at the discretion of the scheme trustees, guided by the member's expression of wishes (death benefit nomination). This is not a testamentary document — it does not appear in your will and is not subject to probate. The nomination must be filed directly with the pension provider.

The annual review should confirm:

• Is the nominated beneficiary still the person(s) you want to receive the pension?
• Has there been a change in family circumstances — marriage, divorce, death of a nominated beneficiary, birth of a child or grandchild — that should prompt a nomination update?
• Is the nomination form up to date with the scheme administrator?

For internationally mobile members — particularly those with overseas-resident family members — the death benefit nomination is especially important. UK pension death benefits paid to non-UK-resident beneficiaries may be subject to UK income tax (where the deceased is over 75), and the interaction with the beneficiary's country of residence tax rules should be reviewed.

Note: from April 2027, unused pension funds and death benefits will be brought within the scope of inheritance tax (announced in the 2024 Autumn Budget and enacted in the Finance Act 2026). The interaction between your death benefit nomination and your wider estate planning should be reviewed by a qualified adviser in light of these changes.

5. Health and Lifestyle Changes

Health changes have two distinct implications for drawdown:

Effect on longevity assumptions. A significant health event may reduce life expectancy. This has complex emotional dimensions, but from a financial planning standpoint, it may mean that the current withdrawal rate is no longer the primary concern — or that annuitisation at enhanced rates becomes available.

Effect on expenditure needs. Healthcare and care costs in later life can be substantial and are difficult to predict. If health has deteriorated, it may be worth reviewing whether the current drawdown pot includes an adequate reserve for potential care needs, or whether additional planning (long-term care insurance, property assets) is needed.

Effect on annuity eligibility. Enhanced (impaired life) annuities can provide substantially better rates than standard annuities for individuals with certain health conditions. If health has changed materially since drawdown was taken, the cost-benefit calculation of partial annuitisation may have shifted.

6. Charges and Platform Review

Drawdown platforms charge ongoing fees — typically a combination of platform charges (a percentage of assets or a fixed fee), fund management charges (embedded in the fund's ongoing charges figure), and potentially advice fees. Total annual charges in a self-directed SIPP might reasonably be expected to be in the range of 0.3–0.7% per annum; advised drawdown might add a further 0.5–1% for ongoing advice.

At the annual review, confirm:

• Are total charges still competitive relative to the services received?
• Has the platform fee structure changed (providers sometimes revise their fee tiers as assets under management increase or decrease)?
• For advised clients: is the ongoing advice fee commensurate with the reviews, calls, and recommendations actually provided?
• Are there lower-cost options now available that were not available when drawdown was initiated?

For larger pots, platform charges that appear small in percentage terms can be large in absolute amounts. A £1.5m pot paying 0.45% in platform charges is paying £6,750 per year — for which you should reasonably expect meaningful services.

7. Tax Position Review

Drawdown income is taxable as income. In retirement, the tax position may change from year to year — particularly for investors who choose flexible withdrawals. Each year, review:

• Is your total taxable income for the year (drawdown plus State Pension plus any other income) being managed efficiently across tax bands?
• Have you used the annual ISA allowance to shelter non-pension savings?
• Could withdrawals be adjusted between your pension and ISA to optimise the tax position in the current year?
• For non-UK residents: is the correct tax code applied to your UK pension? Are you claiming double taxation treaty relief if applicable?

How Global Investments Can Help

Global Investments provides ongoing drawdown management and annual review services for HNW individuals in retirement. Our structured review process covers all of the areas described above, integrated with a client's broader financial plan. For internationally mobile retirees drawing UK pension income from overseas, we add cross-border tax analysis and currency management to the standard drawdown framework.

If your pension drawdown has not been reviewed in the past twelve months — or has never been reviewed since inception — we can conduct a comprehensive assessment and recommend adjustments where needed.

This guide is for educational purposes only and does not constitute regulated financial advice. Pension rules and tax treatment are subject to change. Always consult an FCA-authorised adviser when reviewing your drawdown strategy.