Options for using your pension pot

Understanding your pension options

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)

With a 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.

Pension Annuity Key Features

Take up to 25% of your pension pot as a tax-free lump sum
Use the rest to buy a guaranteed regular income for life
Choices include a fixed or increasing income and how often it’s paid

Pension Annuity

Retirement income calculator

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

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
Option to receive no income and just a lump sum

Fixed Term Retirement Plan

Retirement income calculator

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!

Take up to 25% of your pension pot in tax-free lump sum
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

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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.

Pension Drawdown

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How does pension drawdown work?

Pension drawdown lets you keep some or all of your pension savings invested. Depending on your personal circumstances and future intentions, this may remain in the same fund or it could be moved to a different fund. You can then take money out 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.

Next steps

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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 138 3944

Monday to Friday 9am to 5pm.
Calls may be recorded and monitored.

Speak with us

Our colleagues are always happy to help with your annuity questions or to help you apply for an annuity quote.

Get financial advice with HSBC

HSBC’s financial advice could help you plan ahead by thinking about your finances now, to shape the future you're looking for.

If you would like a personalised recommendation on your retirement planning or other aspects of your financial life, such as protecting your family to managing and growing your wealth.