Retirement options
Let it grow
Keep your pension pot where it is
You can postpone withdrawing money from your pension pot to give yourself more time to consider your options. Turning 55 or reaching the retirement age agreed with your pension provider does not mean you must act immediately. By delaying, your pension pot may have the opportunity to grow, although there is a risk it could decrease in value.
Annuity
Get guaranteed retirement income
An annuity offers a regular guaranteed income in retirement, ensuring you receive payments for as long as you live or for a fixed number of years. Usually, you can withdraw a quarter of your pension pot tax-free, while any additional payments will be subject to taxation.
Drawdown
Get flexible retirement income
You can leave your money in your pension pot and opt for a pension drawdown, allowing you to take an income from it while keeping the remaining funds invested. This approach may give your pension pot a chance to grow, although it could also decrease in value. You can usually withdraw a quarter of your pension pot tax-free, while any additional withdrawals, whether taken as income or lump sums, will be taxed. You might need to transfer to a new pension plan to utilise this option.
Lump sum
Take your whole pension pot in one go
You have the option to withdraw the entire amount as a lump sum. Typically, you can usually take a quarter of your pension pot tax-free, while the remaining amount will be subject to taxation. It’s important to plan how you’ll generate income for the rest of your retirement
Multiple lump sums
Take your pension pot as a number of lump sums
You can keep your money in your pension pot and withdraw lump sums as needed until the funds are depleted or you choose another option. You have the flexibility to decide when and how much to take out. Any remaining money in your pension pot stays invested, which could potentially increase your savings, though it might also decrease in value. Usually, a quarter of each lump sum is tax-free, while the rest is taxed. You may need to switch to a new pension plan to utilise this option.
You have the flexibility to choose multiple options
You can take your pension using a mix of some or all available options, either over time or across your entire pot. If you have multiple pots, you can apply different options to each one. Some pension providers or advisers offer plans that combine a guaranteed lifetime income with flexible income options.
FAQs
What’s the difference between drawdown and an annuity?
Drawdown allows you to withdraw from your pension pot regularly or as needed. While it offers more flexibility, it carries higher risks since the remaining funds stay invested and can fluctuate in value. An annuity provides a guaranteed income, typically for life or a fixed period, purchased with a lump sum from your pension pot.
Can I sell or change an annuity?
No, once you have set up an annuity, it cannot be changed, sold or transferred.
What happens to an annuity when you die?
Depending on your product and provider, you may be able to ensure that the annuity can be passed on to a beneficiary. If you choose this option, your annuity provider might offer you a lower annuity income.
