Pension Income: Self Administered Drawdown Pension
Comprehensive guide to securing mortgages using self-administered pension drawdown income (SIPP/SSAS), including lender assessment criteria, income calculation methods (50-100% usage), and strategies for demonstrating sustainability.
Mortgages with Self-Administered Pension Drawdown Income
Self-administered pension drawdown income (SIPP/SSAS) can be used for mortgage affordability, but lenders apply specific criteria. Understanding how your pension drawdown is assessed is crucial for securing the mortgage you need.
What is Self-Administered Pension Drawdown?
Rather than buying an annuity, you keep your pension invested and withdraw flexible income. Common structures include:
- SIPP (Self-Invested Personal Pension): Individual control over investments
- SSAS (Small Self-Administered Scheme): Typically for company directors
How Lenders Assess Drawdown Income
Unlike guaranteed annuity income (which lenders accept at 100%), drawdown income is variable, so lenders are more cautious.
| Lender Type | Income Calculation | Sustainability Assessment | Maximum LTV |
|---|---|---|---|
| High Street Banks | 50-75% of drawdown | Require evidence of pension pot sustainability | 75-85% |
| Building Societies | 75-100% of drawdown | Detailed fund value review | 75-90% |
| Specialist Lenders | 100% of drawdown | Less stringent on sustainability | 80-95% |
| Private Banks | Case-by-case | Holistic wealth assessment | 75-90% |
Key Lender Requirements
Evidence Required:
- Latest pension statements: Showing total fund value
- Drawdown history: 6-12 months of actual withdrawals
- Pension provider letter: Confirming drawdown arrangement
- Sustainability assessment: Demonstrating withdrawals won't deplete fund prematurely
- Investment strategy: Some lenders want to see conservative, sustainable investments
Income Calculation Methods
Method 1: Actual Drawdown Lender takes your current monthly drawdown amount and uses 50-100% of it for affordability.
Example: £2,000/month drawdown → Lender uses £1,500 (75%) for affordability
Method 2: Sustainable Drawdown Lender calculates what you could sustainably withdraw based on fund size and life expectancy.
Example: £500,000 pension pot, age 60 → Lender calculates ~£1,800/month sustainable = £1,350 used (75%)
Method 3: Combined Approach Takes the lower of actual drawdown or calculated sustainable amount.
Real-World Scenarios
Retired Executive with Large SIPP Graham, 62, had a £800,000 SIPP with £3,500/month drawdown. Despite the large fund, his lender only used £2,625 (75%) for affordability. This still allowed him to secure a £300,000 mortgage at 75% LTV with a competitive rate of 5.2%.
Early Retiree with Modest Pension Drawdown Sarah, 58, accessed her pension early with £180,000 fund value and £1,200/month drawdown. Her specialist lender accepted 100% of drawdown income, enabling a £150,000 mortgage at 60% LTV (4.8% rate) for a downsize purchase.
Director with SSAS Income Michael, 67, drew £2,800/month from his company SSAS. His building society required evidence the £420,000 fund could sustain withdrawals. After submitting actuarial projections, they accepted 80% (£2,240), securing his £220,000 remortgage.
Challenges and Solutions
Challenge: Lender only accepts 50% of drawdown income Solution: Demonstrate large fund value and conservative investment strategy to negotiate higher percentage
Challenge: Variable monthly drawdown amounts Solution: Provide average over 12 months and commit to maintaining that level
Challenge: Young retirement age (under 60) raises sustainability concerns Solution: Show substantial fund value relative to withdrawals (e.g., £500k fund for £1k/month = 40+ years)
Expert Tips
- Standardise Your Drawdown: Take consistent monthly amounts 6-12 months before applying
- Maximize Lender Usage: Specialist lenders often accept 100% of drawdown vs 50-75% from high street banks
- Supplement with Other Income: Rental income, dividends, or part-time work strengthens applications
- Demonstrate Sustainability: Show fund value can support withdrawals for 25-30 years
- Conservative Investments: Lenders prefer balanced portfolios over high-risk investments
Tax-Free Cash Lump Sum
Can you use your 25% tax-free lump sum as deposit? Yes! Many retirees use their tax-free pension lump sum for deposits. Lenders accept this without issue, but won't count it as "income" for affordability.
Example: £300,000 pension pot → £75,000 tax-free lump sum for deposit + ongoing drawdown for affordability
Combining Drawdown with State Pension
| Income Source | Lender Treatment | Notes |
|---|---|---|
| State Pension | 100% accepted | Guaranteed, inflation-linked |
| Drawdown Income | 50-100% accepted | Variable, assessed for sustainability |
| Combined | Additive | Strengthens affordability significantly |
Frequently Asked Questions
Q: Can I get a mortgage if I only have pension drawdown income? A: Yes, many lenders accept pension drawdown as sole income, though specialist lenders offer better rates.
Q: What if my pension drawdown varies month to month? A: Lenders typically average your drawdown over 6-12 months. Consistent withdrawals help applications.
Q: Do I need to commit to maintaining my current drawdown level? A: Some lenders require written confirmation you'll maintain current withdrawal rates during the mortgage term.
Q: What if my pension pot is invested in high-risk assets? A: Lenders may be cautious. Consider rebalancing to more conservative investments before applying.
Q: Can I increase my drawdown to improve affordability? A: Yes, but be mindful of sustainability. Lenders will check increased withdrawals won't deplete your fund prematurely.
Age-Related Considerations
Age 55-65: Lenders comfortable with pension drawdown, especially with large fund values Age 65-75: More scrutiny on sustainability, but still good options available Age 75+: Specialist lenders essential, may require larger deposits (40%+)
How We Can Help
As mortgage specialists experienced with pension drawdown income:
- Access to 40+ lenders who understand SIPP/SSAS income
- Maximise income usage by finding lenders who accept 100% of drawdown
- Navigate sustainability requirements with proper documentation
- Secure competitive rates for retirees and early retirees
Next Steps
- Gather pension documentation: Latest statements, drawdown history, provider letters
- Calculate sustainable withdrawals: Ensure your drawdown level is maintainable long-term
- Speak to us: We'll find lenders who maximise your pension income for affordability
Ready to explore mortgage options with pension drawdown income? Our team specialises in later-life lending and can secure your best rate quickly.