How to help clients make a drawdown transfer

  • Explain the required conditions for doing a partial or full transfer
  • Explain how to transfer crystallised pensions
  • Explain how statutory permissive override works
How to help clients make a drawdown transfer
Credit: Gustavo Fring/Pexels

There are many reasons why it may be in a client’s best interest to transfer their pension.

These can include accessing greater investment choice, better service, online functionality, flexibility in how benefits can be taken, lower fees, improved death benefits, consolidation, or because a scheme is closing. 

Whatever the reason for transferring, when it comes to pensions that are already designated to drawdown there are a few important points advisers need to be aware of and factor into their planning.

Keeping funds together

When pension benefits have not been accessed (uncrystallised funds) then it is possible to make a full or partial transfer.

Once funds have already been designated to drawdown (crystallised) then these funds must be kept together and cannot be split on transfer. 

If funds are to be transferred in specie, then it is important to check that the provider you are recommending the transfer to, will accept all the assets.

Problems can arise if there are distressed or illiquid investments in the portfolio which cannot be moved.

With uncrystallised funds it may be possible to leave these behind, but the “all or nothing” requirement for crystallised funds means this is not an option for drawdown funds.  


However, as with many HMRC rules, there are exceptions.

There are two sets of circumstances that allow drawdown funds to be split. These are for partial annuity purchases and pension sharing orders. 

Where an existing drawdown fund is being used to purchase an annuity the member does not have to use all the crystallised fund. They can use just part of it to buy the annuity, with the remainder left in the pension scheme continuing in drawdown.

Similarly, if a member is going through a divorce and the courts issue a pension sharing order, then the member’s existing drawdown fund may be split to provide the member’s ex-spouse with a pension as part of those divorce proceedings.

In both scenarios, if the member’s drawdown fund was a capped drawdown arrangement, then the maximum annual income would be reviewed after the annuity purchase or pension sharing order to reflect the fact that the drawdown fund has been depleted.

The new maximum income would then come into effect at the start of the next pension income year.

A transfer may contain both an uncrystallised element and drawdown funds – in which case it is possible to transfer just the uncrystallised element, just the drawdown funds, or the drawdown funds and part of the uncrystallised funds. As long as the drawdown funds stay together there is freedom to split the uncrystallised element if required.  


When crystallised pension funds are transferred from one scheme to another, they can only be transferred on a “like-for-like” basis.