Choices in retirement

If you pay into a pension scheme during your working life, you can start accessing those savings from age 55. But how and when you start accessing those savings is really up to you and your financial adviser if you have one. Here are your options, and the key things to consider.

Keep your pension pot where it is

You don’t have to start taking money from your pension once you turn 55. Your savings can remain invested until you need the money, at which point you can decide how and when you want to take a lump sum and/ or a retirement income. If you delay taking your money, it could give your pension pot a chance to grow – but it could go down in value too.

Take your whole pension pot in one go

You can take your whole pension pot as a single lump sum, but usually only a quarter of your pension pot will be tax-free. The rest will be subject to income tax. If you choose this option, you’ll need to plan how the lump sum can provide an income for the rest of your retirement.

Take your pension pot as several lump sums

You can withdraw lump sum payments from your pension pot at any time, until your money runs out or you choose another option. The amount you take and how often you take it is entirely up to you. A quarter of each lump sum withdrawal will be tax-free, but you’ll pay income tax on the remainder. Any money left in your pension pot will remain invested, so the value of it could grow or decrease over time.

Get a flexible retirement income

You can withdraw regular income from your pension pot. The money left in your pension will remain in an investment fund, so the value of your pension could grow or decrease over time. Each time you withdraw money, a quarter of it will be tax-free – you’ll pay income tax on the remainder.

Alternatively, you can take all of your tax-free cash (25%) upfront, but any further withdrawals will be subject to income tax. You don’t have to take an income if you don’t want to.

Get a guaranteed income for life

You can receive a guaranteed, regular income (also known as an annuity) for the rest of your life. You can take a quarter of your pension pot tax-free, but you’ll pay income tax on the remainder.

Combine your pension options

Depending on your needs, you can choose to access your retirement savings using a combination of the options above. You can do this over a set period of time or until you’ve used your entire pension pot. If you have more than one pension, you can use different options for each pot. Some pension providers can offer a combination of a guaranteed income for life with a flexible income.

Any references to taxation are based on our current understanding of HMRC rules and regulations which are subject to change. Your retirement choices will have a big impact on your future. We recommend speaking to a financial adviser before you decide on one of our pension products. Together, you can take a good look at your immediate goals and long-term expectations in retirement. As with all financial products, you should never feel rushed into making a decision.

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