Your retirement options

From age 55, you now have more options than ever with how you take your pension.

Turning your pension into an annuity will provide a guaranteed and regular income for life and, if you choose, for your beneficiaries after you die.

Benefits
  • Provides a secure income for life.
  • Level or changing income options.
  • Low-risk way to take your pension.
  • Options for a chosen beneficiary.
Considerations
  • You should shop around for a retirement income as, depending on the choices you make, you may get a more suitable product elsewhere.
  • Certain health and/or lifestyle conditions, could mean a higher income. Different providers also cover different conditions.
  • Any guarantees you may have on your pension may be lost and result in a lower income.

Enter your age and pot size

£

Tell me more

There are different annuity types to choose from - providing level income or increasing payments to potentially cover the effects of inflation; an income for your partner or dependant after you die; or a higher income for those with certain health conditions.

You can usually take up to 25% of your pension pot as a tax-free cash lump sum when you take out an annuity. You just need to ensure it’s the right option for you as, once taken, you cannot change your mind. See our articles below for more information and inspiration, or get an idea of how much you could get with our calculator.

Important information

We are not recommending one option over another. If you are a member of an 'occupational pension scheme', the options available to you may vary, so please contact your provider.  If you have a pension with safeguarded benefits of £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option, such as taking the whole pension pot as cash or as flexible income.

Tax rules require careful consideration and may not reflect your individual circumstances so your actual liability may be higher or lower. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.gov.uk.

Pension Wise

We recommend that you use Pension Wise, a government service offering free and impartial guidance to those aged 50 or over.  Find out how to access this by visiting www.pensionwise.gov.uk or call  0300 330 1001 to book an appointment.  This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.

Moving your pension into a 'flexi-access drawdown' plan allows you to choose how much money you take out and when, but you need to ensure it can last.

Benefits
  • You can decide when and how you take out income as your needs change.
  • You can choose where your remaining fund is invested.
  • If you wanted, you could purchase an annuity later.
  • Any money left in your pot when you die can be passed on to your beneficiaries.
Considerations
  • If investment returns are low and/or you take out too much money, you may run out and need to rely on other income. You may also not get back what you put in.
  • You may lose any existing guarantees you have on your pension.
  • The amount you can contribute tax-free into a pension may be restricted in the future.
  • You should shop around for a retirement income as, depending on the choices you make, you may get a more suitable product elsewhere.

You seem to be using an older version of your web browser.

We recommend that you upgrade your browser to the latest version so that you can access our full range of content and functionality.

Enter your age and pot size

£

Tell me more

After transferring your pension to a flexi-access drawdown plan, the main difference to an annuity is that you’re able to manage how much money you take and when - and where it is invested. There may be a charge each time you withdraw money. Like the cash option, if it’s your main source of income, you just need to be careful that it can last throughout retirement as there are no guarantees. Otherwise you will have nothing to pass on to loved ones when you die.

You can manage your income to stay within certain tax limits, but any money you take out of your fund over your 25% tax-free allowance at outset, is taxed as income in the same way as most other retirement options.  Depending on how, and when you take the money, it could result in you paying a higher rate of tax on this, or any other income.

Important information

We are not recommending one option over another. If you are a member of an 'occupational pension scheme', the options available to you may vary, so please contact your provider.  If you have a pension with guaranteed benefits of £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option, such as taking the whole pension pot as cash or as flexible income.

Tax rules require careful consideration and may not reflect your individual circumstances so your actual liability may be higher or lower. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.gov.uk.

Pension Wise

We recommend that you use Pension Wise, a government service offering free and impartial guidance to those aged 50 or over.  Find out how to access this by visiting www.pensionwise.gov.uk or call  0300 330 1001 to book an appointment.  This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.

You can now take all of your pension as a single or series of cash lump sums, but if it’s your main source of income, you’ll need to ensure it can last.

Benefits
  • The cash can be taken in one lump sum to spend however you want.
  • Alternatively, you can take smaller lump sums, as and when you like, with the remainder staying invested in your pension.
  • Each payment, whether taking the whole fund or smaller payments, will usually be 25% tax-free and the remainder added to your income for the year and taxed accordingly.
Considerations
  • If investment returns are low and/or you take out too much money, you may run out and need to rely on other income. You may also not get back what you put in.
  • Depending on how and when you take the cash lump sum, you could end up paying a higher rate of tax on this, and any other income.
  • Any guarantees you may have on your pension may be lost and result in a lower income.
  • The amount you can contribute tax-free into a pension may be restricted in the future.

You seem to be using an older version of your web browser.

We recommend that you upgrade your browser to the latest version so that you can access our full range of content and functionality.

Enter your age and pot size

£

Tell me more

You can take all of your pension as cash provided you have a 'defined contribution' pension, and are aged 55 or over (this can be lower in certain circumstances). You have the freedom to do whatever you like with the money withdrawn. However, like the flexible income option, there are no guarantees that it will last throughout your lifetime, or that of a loved one if you want to pass money on after you’ve gone.  Would the basic State Pension and any other investments you may have fund your current lifestyle, for instance?

Taking your pension as cash may affect your entitlements to some means tested state benefits, or debts you have – as creditors may have claim on the money.

See our articles below for more information and inspiration, or get an idea of how much you could get with our calculator.

Important information

We are not recommending one option over another. If you are a member of an 'occupational pension scheme', the options available to you may vary, so please contact your provider.  If you have a pension with guaranteed benefits of £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option, such as taking the whole pension pot as cash or as flexible income.

Tax rules require careful consideration and may not reflect your individual circumstances so your actual liability may be higher or lower. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.gov.uk.

Pension Wise

We recommend that you use Pension Wise, a government service offering free and impartial guidance to those aged 50 or over.  Find out how to access this by visiting www.pensionwise.gov.uk or call  0300 330 1001 to book an appointment.  This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.

It may be possible to mix and match what you do with your pension pot at different points in your retirement.

Benefits
  • You can take your pension pot as cash along with an income to provide some flexibility and security.
  • Within the income option, you can either turn your pot into an annuity or flexi-access drawdown or choose a combination of the two.
  • However you combine options, you’ll be able to take 25% of your money tax-free.
Considerations
  • Before combining any options, take time to think about the benefits and considerations of each option on its own.
  • The value of any money that remains invested can go down as well as up and you may not get back the amount you put in.

Tell me more

As well as taking cash from your pension, if you want to turn part of your pension savings into an income, you don’t have to choose between buying an annuity or moving your money into flexi-access drawdown. You could opt for a mix of the two – buying an annuity with some of your pot for a guaranteed income, along with having some invested in a flexi-access drawdown plan, which could be used to provide an additional income or lump sum, as and when you need it.  When taking your money as cash or as a flexible income, bear in mind it could run out. Also, the value of any money held in a flexi-access drawdown plan could go down as well as up whilst it is invested. The income from any annuity, if taken, will remain secure.   

Each individual option has further benefits and considerations so please refer to the separate options above for guaranteed income, flexible income and take it as cash for more information.

Not all providers offer all options and/or the ability to combine them. You may also incur additional charges and/or penalties so be sure to check. Depending on the type of pension/s you have, you may be able to combine your options with us. Please get in touch for further information. We also recommend talking to a financial adviser to make sure you’re aware of all the implications of combining options. 

Important information

We are not recommending one option over another. If you are a member of an 'occupational pension scheme', the options available to you may vary, so please contact your provider.  If you have a pension with guaranteed benefits of £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option, such as taking the whole pension pot as cash or as flexible income.

Tax rules require careful consideration and may not reflect your individual circumstances so your actual liability may be higher or lower. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.gov.uk.

Pension Wise

We recommend that you use Pension Wise, a government service offering free and impartial guidance to those aged 50 or over.  Find out how to access this by visiting www.pensionwise.gov.uk or call  0300 330 1001 to book an appointment.  This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.

You don’t have to do anything with your pension savings when you reach age 55. If you don’t need the money just yet, you could leave it invested for now.

Benefits
  • As long as your money stays in your pension pot you won’t usually pay tax on it.
  • You can still pay into your pension pot which means it can potentially grow and you could have more to retire on when the time comes.
  • Until age 75, you’ll get tax-relief on contributions you make into your plan.
  • Your pension pot could grow further and give you a larger amount of money to last for a shorter amount of time.
Considerations
  • Your fund value can go down as well as up, while it remains invested, and so you may not get back what you put in.
  • There’s no guarantee you’ll get more, or the same level of cash and/or income from your pensions savings if you take it at a later date.
  • Charges for managing the fund will continue to be applied whilst your money remains invested.
  • You may lose any guarantees and/or restrictions may apply if you delay taking your pension beyond the original retirement date.

Tell me more

You don’t have to take money from your pension pot when you reach the age you originally agreed with your provider. For example, you may have decided that you want to carry on working for longer. Your pension savings could grow, meaning more money for the years of retirement when you do eventually decide to retire. But as it’s invested, your fund could go down as well as up during this time.  

You won’t usually pay tax on your pension whilst it is still invested and, until age 75, you will still receive tax relief on any contributions you make although the amount of tax relief available will vary based on your circumstances. If you happen to die before the age of 75, any money in your pension can be passed on tax-free, provided the scheme is notified within two years of your death and your pension pot is below the Lifetime Allowance.

Check everything thoroughly with your provider before choosing to delay taking your pension, as although you no longer have to buy an annuity by age 75, there may be similar-type rules specific to your plan or pension scheme. If you want to delay taking your pension with us, this will depend on the type of plan you have. There may also be an upper age limit on when you can take your money as cash or turn it into an income. Please refer to your key features documents for further information. 

You can also delay taking your State Pension until you’re ready, which you can read more about in our articles below.

Important information

We are not recommending one option over another. If you are a member of an 'occupational pension scheme', the options available to you may vary, so please contact your provider.  If you have a pension with guaranteed benefits of £30,000 or more, legislation requires you to take financial advice when looking to convert into a flexible option, such as taking the whole pension pot as cash or as flexible income.

Tax rules require careful consideration and may not reflect your individual circumstances so your actual liability may be higher or lower. The above is based on our understanding of current taxation, legislation and HM Revenue & Customs practice, all of which is liable to change without notice. For more information please visit www.hmrc.gov.uk.

Pension Wise

We recommend that you use Pension Wise, a government service offering free and impartial guidance to those aged 50 or over.  Find out how to access this by visiting www.pensionwise.gov.uk or call  0300 330 1001 to book an appointment.  This service is available on the internet, over the telephone or face to face at a Citizens Advice branch.

You may also like to contact a financial adviser.

Need help? Have questions?

If you're looking for further information or want to chat about your product options, we can help.

Contact us