Following recent pension legislation changes, you now have even more options when it comes to accessing your pension pot. As you get closer to retirement, you'll need to consider your options carefully to make sure you make an informed decision on how to make best use of your savings in retirement.
The government has introduced a free and impartial guidance service called Pension Wise to help people understand how to turn their pension pot into income for retirement. They suggest 6 steps:
✓ Check how much is in your pension pot
Contact your provider for a current valuation. If you're a Legal & General customer login or register for Manage Your Account to see how your pension is doing.
✓ Understand what you can do with your pension pot
Take time to think about which option suits you best.
For more information about these options, take a look at Accessing your pot.
✓ Plan how long your money needs to last
You need to think about when you'll start taking money from your pension pot and how much you'll need at different times.
✓ Work out how much you'll have in retirement
Try to work out how much money you'll have available from your pensions and other sources and whether it will cover your costs. You can use our our interactive Retirement Planner to see how much your pension pots might be worth at your expected retirement age.
✓ Watch out for tax
Your income in retirement is taxed, just like when you're in work. Any money taken from your pot that is not tax-free will be added to your taxable earnings and could increase the amount of tax you pay.
✓ Shop around for the best deal
You don't have to stay with your current pension provider and you could benefit from shopping around and comparing what's available.
Investment glide-paths. Your workplace scheme may have a default investment fund for its members but you can choose how the money in your pot is invested. You can move ('switch') your existing pot into the fund or funds you want and change ('redirect') how any future contributions are invested too. Different investment funds have different levels of risk and potential reward. A fund invested in equities whilst trying to grow your pot may not be appropriate as you get closer to accessing it for example.
Our interactive Retirement Planner also has an Attitude To Risk tool that helps identify the profile that most closely matches your attitude to investment risk. This profile can then be used as a guide for selecting an appropriate investment strategy.
Your provider will write to you a few months before your selected or default retirement age with more information about the options you have.
When you decide to start taking your pension pot, you'll need to choose how and when you do this. Find out more about these options and some of the important things to consider for each.
A free and impartial government service that helps you understand your new pension pot options from April 2015.
See your options in retirement and find out your possible retirement income based on your current savings level.