Options for using your pension pot
There’s no one ‘right’ answer so take a look at all the options to see what might be best for you.
Get a guaranteed income for life (Pension Annuity)
You could be paid a guaranteed amount every month, or year for life, so you'll always know exactly how much you're getting.
Download our Key Features
- Take up to 25% of your pension pot as a tax-free lump sum
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Use the rest to buy a guaranteed regular income for life
- Choices include a fixed or increasing income and how often it’s paid
Are you transferring from a drawdown plan?
If you are transferring from a drawdown plan, there won’t be any additional tax-free cash payable from that pot. Tax-free cash is only payable from savings you’ve not yet accessed. If you’re unsure, please contact your current provider .
Get a guaranteed income for a set period with a lump sum at the end (Fixed Term Retirement Plan)
If you like the security of a guaranteed income, but want to give yourself options later in life, this may be for you. It ends with a lump sum that you can use to make new choices.
Fixed Term Retirement Plan Key Features
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Take up to 25% of your pension pot as a tax-free lump sum
- Use the rest to buy a regular income for up to 25 years with a lump sum at the end
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The income stops at the end of the set period
Get a guaranteed income for a set period (Cash-Out Retirement Plan)
A way to take cash or use as a bridge to a future date when another source of income starts.
Cash-Out Retirement Plan Key Features
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Take up to 25% of your pension pot as a tax-free lump sum
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Use the rest to buy a regular income for up to 25 years
- The income stops at the end of the set period
Get a flexible income (Pension Drawdown)
If you don't mind the uncertainty of investment risks, you can choose to move your pension into drawdown. This will mean your pension may benefit from investment growth and you can choose to take money out of it when it suits you. There may be a charge for this. How much and how often you take money is up to you but when you’ve taken it all there’s nothing left.
- Take up to 25% of your pension pot as a tax-free lump sum
- Invest the rest with the flexibility to access the remainder of your pot when you want
- Your money is still subject to investment risk and the amount you have invested can go down as well as up
How does pension drawdown work?
Pension drawdown is a flexible way to access your pension while allowing your money to remain invested. This may be in the same investments you had for your pension or it could be in different investment funds. You can then take money out (drawdown) when it suits you. The more money you take out, the quicker your pot will run out. If you change your mind at a later stage and want a guaranteed income, then you could use whatever remains in the pot to buy an annuity or another suitable product.
Cashing in your pension pot
Take up to 25% from your pension pot tax-free. The rest is counted as income in the year you take it, so you need to be careful, otherwise you could end up paying more in tax than you might need to. Ouch!
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Take up to 25% of your pension pot in tax-free lump sums
- The remainder is treated as taxable income so you may pay tax at a higher rate than you would normally do
- You’ll need to consider a suitable home for your pension savings once you’ve taken them all as cash
Next steps
Now that you've seen your options, here is some further helpful information.
Need some help?
Making well-informed decisions about financing your retirement is important so it’s worth shopping around and using available guidance and advice, before you buy. 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 011 3797
9am to 5pm, Monday to Friday.
Calls may be recorded or monitored.
Speak with us
Our colleagues are always happy to help with your questions or to help you apply for a quote.
Get 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.