Using your pension
When it comes to deciding how to use your pension savings, there’s no ‘one’ right answer, retirement is a journey and you may need different options at different points along the way.
You can start by thinking about what income you will need when you retire and what you already have. It’s important to plan what you want your retirement to look like.
What will you need?
For a moderate lifestyle (where you could have a foreign holiday each year and eat out a few times each month, for example) you'd probably need a retirement income of £31,300 after tax per year or £43,100 for a couple.
To work out what you might need, use our Retirement living standards tool:
What will you have when you retire?
Take a look at all your pensions to see what your retirement could look like. You can find out how much you have in your Legal & General pension by logging into your account.
Remember to check what you have in any other pensions that you have. Think about combining your pension savings into one place so you can see everything together. You can bring all your pensions together in your Legal & General pension through your account.
Your options
You can access your pension pot from the Normal Minimum Pension Age, which is usually 55 (57 from 2028), or sometimes earlier if, for example, you’re in ill-health. If you're ready to use some or all of your pension savings, you have four options. You can choose one or more options, depending on what you need your pension savings to achieve for your retirement.
What are your options?
Our 4 minute video is an easy way to get an overview of all your options - including how much tax-free cash you can take, and what to look out for when making a decision.
Transcript: What are your options?
How do you want to use your pension savings?
Now that you know what your options could be, it's time to find out more about each one - so that you can make the best use of your pension savings.
It’s important to shop around before making a decision. Different providers will have different rates, features and charges.
Taking money from your pension
If you do start taking an income from your pension savings you’ll be subject to the Money Purchase Annual Allowance and your tax status may change.
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.
Remember however you choose to use your pension savings:
Ready to make a decision about your pension savings?
You'll need to have received your Pension Maturity Pack first. If you’ve not received yours, or received it more than 12 months ago, you can request it online by logging on to your account and clicking on your pension.
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. Any money you have left in your pension savings, could be used to buy a guaranteed income in the future.
The money you don't take out stays invested, which means it could grow, but can also fall in value.
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'll 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 large amounts 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 (in fact, more than 1 in 10 people aged 65 and over do) 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.
- The amount shown on any quotes 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, on our hub: Uncertain times hub.
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 100 166
8am to 6.30pm, Monday to Friday.
Calls may be recorded and monitored.
Speak with us
Our colleagues in Cardiff are always happy to answer your questions.
0370 165 9406
Monday to Friday
8.30am to 7pm
Call charges will vary.
We may record and monitor calls.
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.