How to find the best drawdown pension provider in the UK

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?

Discover more about drawdown pensions and the best providers below.

What is a drawdown pension?

Pension drawdown is an alternative to an annuity.

With drawdown, you can withdraw a flexible income while leaving your pension fund invested instead of buying an annuity, which gives you a guaranteed income for a specified period or for life.

Learn more: Annuity vs drawdown – which is best for me?

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 2023, consumer group Which? found that the difference between the cheapest and most expensive drawdown plans for a £260,000 pension pot was a staggering £18,000 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 various ways, which can make it tricky to compare.

This is where an independent financial adviser (IFA) can be of real value.

They detailed knowledge about different providers and how their products are structured, as well as insight into each company’s performance, which 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 fees 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 many factors to consider and a lot of small print to read.

You could save yourself a lot of time and, in the long-term, money by speaking with a financial adviser who specialises in pensions and can find the most suitable provider for you.

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 financial advisers are typically paid through fees rather than commission, ensuring their advice is impartial.

If financial advice appears to be free, it’s crucial to understand how the adviser is compensated and whether they are truly independent or working with a specific set of products.

What’s more, a financial adviser can help you save money in other ways that you may not have thought about.

For instance, in addition to recommending investments with lower fees that'll save you money 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 best drawdown pension providers in the UK?

The below 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 financial advice is strongly recommended. 

1. Vanguard

The US investing giant entered the UK pension market in February 2020, but its drawdown pension plan has 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 around 0.80%.

There is no additional annual SIPP (self-invested pension plan) admin fee.

2. AJ Bell

AJ Bell has been a Which? recommended SIPP provider for several years.

Its award-winning platform offers many investment options, including AJ Bell’s fund range, ready-made portfolios, and a favourite funds list.

AJ Bell's self-invested pension plan has earned a five-star rating from the Times Money Mentor, though its drawdown product receives four stars. The provider falls short of five stars due to a £100+ VAT annual fee for regular income drawdown payments.

3. Aviva

Aviva offers a SIPP and drawdown product that can be managed through its online portfolio service, MyAviva.

It’s free to open a SIPP with Aviva, but some fees may apply.

Aviva came top of Times Money Mentor’s customer experience ratings, meaning it excels at customer service, complaints, and transparency.

4. interactive investor

Interactive investor offers the pension essentials and pension builder plans for £5.99 and £12.99, respectively.

However, it’s worth flagging that additional fees may apply.

5. True Potential Investor

True Potential Investor's portfolios blend together tried and tested multi-asset strategies from world-renowned fund managers.

Transfers are allowed from final salary, defined contribution and capped drawdown pensions.

6. PensionBee

You can transfer one or more pensions to set up your PensionBee online plan.

Signing up takes just a few minutes and you can check your pension balance anytime, anywhere.

The annual fee includes all fees with no hidden costs. Pension plans are tailored to meet various savings needs., with fees ranging from 0.5% to 0.95%.

7. Willis Owen

Its SIPP gives you the flexibility to choose between a wide range of investment options, such as funds, shares, investment trusts and exchange-traded funds (ETFs), and you can view your portfolio 24/7.

SIPP fees range from 0.4% for savings up to £100,000, 0.25% for savings between £100,001 and £250,000, to 0.15% for savings over £250,000.

8. 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.

Learn more: Vanguard vs Hargreaves Lansdown: what's the difference?

9. 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.

Royal London's 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.

Get expert financial advice

Choosing the best drawdown pension provider is a crucial step in securing your financial future.

With a wide range of options available, evaluating each provider's fees, services, and reputation can be overwhelming.

By considering factors such as cost structures, customer reviews, and the flexibility of withdrawal options, you can make a more informed decision.

For personalised guidance and to ensure you select the right provider for your unique needs, let Unbiased match you with a financial adviser for expert financial advice.