Your options
When it comes to deciding how to use your pension pot, there’s no one ‘right answer’ as the options you choose will depend on your individual circumstances.
Options available to you
You can access your pension pot from the Normal Minimum Pension Age, which is usually 55 (57 from April 2028), or sometimes earlier if, for example, you’re in ill-health.
25% tax-free: Usually, up to 25% of your pension savings can be withdrawn tax-free (subject to your allowances).
75% taxable: Your remaining pension savings can be used to buy a guaranteed income, moved into a flexible income account (with or without a regular income) or taken as a cash lump sum. These will all be subject to income tax alongside any other income you receive.
If you’re ready to make a decision about your pension savings, you'll need to have received your Pension Maturity Pack first. You can request yours online by logging on to your account and clicking on your pension.
If you have received your Pension Maturity pack, you can find out more about the options that you have.
It’s important to shop around before making a decision. Different providers will have different rates, features and charges.
Don’t forget, Pension Wise from Money Helper is a government service that offers free and impartial guidance and can help you reach a decision on the best approach for you.
A flexible income
Drawdown is a flexible way to take money out of your pension – either regularly, or as and when you need a little extra – until it runs out.
You can access up to 25% cash tax-free from your pension savings and leave the rest invested, giving you the flexibility to choose how and when you withdraw the rest of the money. Any money you have left in your pension savings, could be used to buy a guaranteed income in the future.
With drawdown, you’ll need to manage your money so that it won’t run out.
A flexible income
A guaranteed income
If you're looking for the peace of mind that comes from knowing what your income in retirement will be and that it will last as long as you need it to, you could use some, or all your pension pot to buy a guaranteed income, for life or a fixed number of years.
You can usually choose to take up to 25% as tax-free cash and the rest of your income will be taxable. The amount you can get can vary, and some options can take into account certain health or medical conditions, or lifestyle factors such as smoking.
That's why it's important to shop around before making a decision. When you get a quote from us, we can compare the market for you, and let you know the best options available for your circumstances - even if it's not with us.
There are three ways to secure a guaranteed income from your pension savings:
A guaranteed income for life
A guaranteed income for a fixed number of years, with a cash sum at the end
A guaranteed income for a fixed number of years, with no cash sum at the end
Take cash from your pension savings
You can take:
- A full lump sum (take all your pension savings in one go).
- Partial lump sums (take your pension savings one piece at a time, while leaving the rest invested).
Potential benefits
- You can take the money from your pension savings and use it in a way that’s right for you.
- Up to 25% of each withdrawal will be tax-free, the remaining 75% will be taxed.
Considerations
- You may end up paying a higher rate of tax than usual if you take out a large amount in a particular tax year.
- If you take all your pension savings now, it could mean that you don’t have enough money in later life.
If you're interested in taking all of your pension savings as cash, you can get a quotation by completing and returning the "Your choice to take cash" form, included in your Pension Maturity Pack.
If your Pension Maturity Pack is more than 12 months old you will need to request a new one before you can apply. You can request one online in your account and by clicking on your pensions.
Leave your money where it is
Your options
There’s no need to access your pension savings until you want to. Whether you don't need the income just yet, prefer to keep working or something else - when you access your pension savings is up to you.
If you want to, you can continue to save into your pension and decide what to do at a time that suits you. Your pension savings remain invested, which means their value can go up or down.
Potential benefits
- Leaving your money invested gives it more chance to grow
- You can keep paying into your pension, to build up your pension savings
- You can make a decision when the time is right for you
Considerations
- As with any investment, there's a chance that your pension savings could go down in value too
- As soon as you start taking an income from your pension savings, you'll be subject to the Money Purchase Annual Allowance
- If you have received quotes for some of your options available for you, these aren't guaranteed and the payment amount you actually receive may be different
- In periods of market uncertainty you might experience fluctuations in the value of your pension savings. Find out more about the effect that market movements could have on your pension savings in our article 'Inflation and your pension'
Is it the right time to retire?
If you've had some estimates or quotes for your options, and they don’t meet what you think you'll need in retirement, you could:
- Increase the amount you save each month into your pension subject to your annual allowance
- Review your investments
- Delay retirement
- Continue working, perhaps part-time
- Reduce your income requirements
If you do decide to delay your retirement, it’s important to make sure your retirement age and investments reflect your plans. You can review and update these in your account.
Need some help?
There are different retirement income products to choose from and the rates they offer can vary. Shop around to make sure you get the best deal for your situation and use available guidance and advice services before you apply. Other providers may have more appropriate products or be able to offer a higher level of retirement income.
Retirement guidance
Pension Wise from MoneyHelper
You can get guidance from the government's free and impartial service to help make your money and pension choices clearer.
The availability of appointments can vary between a few days and several weeks, so if you need guidance, it's a good idea to book an appointment slot now:
0800 138 3944
Monday to Friday 9am to 5pm.
Calls may be recorded and monitored.
Get financial advice
We provide a retirement advice service, which can help you review what you have and need before giving you expert advice about how to make the best use of your hard earned pension savings. We will also let you know more about the costs of the service.
0808 304 6861
Monday to Friday 9am to 5pm. Calls may be recorded and monitored.
Get financial advice
Financial advisers can give you professional advice for pension planning.
You usually need to pay for their service and in return they recommend how to make the most of your pension given your circumstances.
To find and compare financial advisers please visit their website below.