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25% tax-free: Usually, up to 25% of your pension savings can be withdrawn tax-free (subject to your allowances).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.
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 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:
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'.
Are your details up to date?
It's important to keep your details up to date - including your planned retirement age. You can do this online in your account, by logging and clicking on your pension details.
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.
What could you get with your pension savings?
Our simple calculator gives a quick estimate of what you could receive with each of your options.
