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Phil Thomas
Senior Technical Support Consultant

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Transfers in drawdown:  HMRC rules explained

Published  12 November 2025
   4 min read

Transfers of drawdown pension plans are a common consideration for advisers seeking flexibility for clients. For a transfer of a drawdown plan to be a recognised transfer and avoid unauthorised payment tax charges it must comply with strict conditions set by HMRC.
 
This article explains the key rules, tax treatment, and practical implications, followed by FAQs.

HMRC rules for recognised transfers

Which drawdown funds can be transferred? 

Sums and assets from any of the following can be transferred to another pension scheme: 

  • drawdown pension fund
  • flexi-access drawdown fund
  • dependant’s drawdown pension fund
  • dependant’s flexi-access drawdown fund
  • nominee’s flexi-access drawdown fund
  • successor’s flexi-access drawdown fund 

However, for a drawdown-to-drawdown transfer to be recognised, the following conditions must be met:  

  • All sums and assets in the drawdown fund must be transferred; partial transfers are not recognised.
  • The receiving scheme must create a new arrangement for the transferred funds, with no pre-existing assets.
  • The new arrangement must provide the same type of drawdown (for example, flexi-access drawdown to flexi-access drawdown).
  • Scheme administrators must exchange details of benefit crystallisation events and allowances used. 
     

Tax Treatment and practical implications  

A recognised transfer avoids unauthorised payment tax charges. However, failure to meet HMRC conditions—such as paying a partial transfer—will result in unauthorised payments and potential penalties. Advisers should ensure compliance and keep an audit trail, especially where statutory overrides or block transfers are involved. 

Frequently asked questions

We frequently get asked questions on transfers in drawdown, so we have pulled together the top 5 questions.

No, a partial transfer is not possible. If the benefits have been designated to drawdown (crystallised) the whole of the drawdown pension fund or flexi-access drawdown fund under an arrangement must be transferred.

No, they can’t as a transfer in drawdown must be to a new arrangement with no assets in it - once one is transferred in, it blocks the transfer of the other(s). This works at the arrangement level so if several segments of a segmented plan are transferred, the segments must be transferred to separate segments of a segmented plan or to separate drawdown plans if the receiving scheme is a single arrangement scheme (so, unsegmented).

Yes, they can if the ceding scheme facilitates it. It would be sensible to obtain evidence from the ceding scheme the statutory override has been used for a clear audit trail.

No, the open market option only applies where someone takes an annuity from their current plan and the annuity is bought on the open market to take advantage of better annuity rates available from another provider. The open market option can only be used to buy an annuity; it can't be used to provide a different kind of benefit such as drawdown.

As there is an entitlement to more than 25% tax-free cash but no access to drawdown from the current plan, the only way to access drawdown is to transfer before taking benefits to a pension plan that provides it.

For the higher tax-free cash entitlement to survive the transfer, the transfer will have to be a block transfer or a wind-up transfer. 

This can only be done if drawdown is an option in the current plan as the tax-free cash can only be paid in conjunction with pension entitlement from that plan.

If it is, the current plan can pay the tax-free cash with the balance going into drawdown. A transfer in drawdown can then be done to another provider.

Alternatively, the current plan can be transferred to a plan with drawdown, who will then pay the entitlement to more than 25% tax-free cash and provide drawdown as long as a block transfer can be done.

Disclaimer

The information provided is based on our current understanding of the relevant legislation and regulations and may be subject to alteration as a result of changes in legislation or practice. Also it may not reflect the options available under a specific product which may not be as wide as legislations and regulations allow.

All references to taxation are based on our understanding of current taxation law and practice and may be affected by future changes in legislation and the individual circumstances of the investor.