1. Retirement
2. Options For Using Your Pension pot
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Options for using your pension pot

We can help you understand the different ways you can use your pension

How do you want to use your pension pot?

When it comes to deciding how to use your pension pot, there's no one 'right answer'. To help you get started, we've set out various retirement income options below. Take a look and see what might be best for you.

Get a guaranteed income for life (Pension Annuity)

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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 (PDF)

  • 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 AnnuityRetirement income calculator

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 (PDF)

  • 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
  • The income stops at the end of the set period
Fixed Term Retirement PlanRetirement income calculator

Get a guaranteed income for a set period (Cash-Out Retirement Plan)

A tax-efficient 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 (PDF)

  • 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
  • The income stops at the end of the set period
Cash-Out Retirement PlanRetirement income calculator

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.

Pension Drawdown Key Features (PDF)

  • 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 DrawdownRetirement income calculator

How does pension drawdown work?

Pension drawdown lets you keep some or all of your pension savings invested. This may fund what you have for your pension or it could be moved to a different fund depending on your personal circumstances. 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.

Combine your pension options

You can combine some of these options, either at the same time, or one after another. This approach gives you plenty of control to meet your needs now and in the future

  • Take up to 25% of your pension pot in tax-free lump sums
  • Split the rest as suits your preferences, across different products
  • Build a more structured plan for each stage of your retirement
Get Retirement Advice

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 sums
  • The remainder is treated as taxable income so you need to be careful you don’t become eligible to pay more tax than you might need to
  • You’ll need to consider a suitable home for your pension savings once you’ve taken them all as cash
Get Retirement Advice

Leave your pension pot where it is

You don’t have to start taking money from your pension pot when you reach your selected retirement age, you could leave it invested.

  • If you don’t need your pension pot now, you don’t need to take it
  • Leaving your pension pot alone could mean that you have more money over a shorter period later
  • Your pot is still subject to investment risk and the amount you have invested may go up and down
Get Retirement Advice

Next steps

It’s worth running some numbers to see what the options might look like for you:

Retirement income calculator
MoneyHelper
Retirement Advice Service
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Need help?

Making decisions about how to finance your retirement is important so it’s worth shopping around and making use of the guidance and advice services available:

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Retirement guidance

Pension Wise from MoneyHelper

The government’s free and impartial service, offering guidance to make money and pension choices clearer.

To find out more or book an appointment online click below or call.

0800 138 3944

Monday to Friday 8am to 5pm.
Calls may be recorded and monitored.

Book an appointment
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Speak with us

Our colleagues in Cardiff are always happy to answer your questions or tell you about our retirement income products.

0800 048 2446

Monday to Friday
9am to 5pm
We may record and monitor calls.

Contact us
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Retirement advice

Retirement Advice Service from Legal & General
Our advisers are experts in retirement regulated by the Financial Conduct Authority, so you can trust them to provide impartial advice and a personal recommendation that’s right for you.

0808 304 9312

Our team is available between 9.00am and 5.00pm, Monday to Friday. Calls may be monitored and recorded.

Find out more