This tool aims to help you understand some of the decisions you need to make when thinking about how to use your pension pot. It should not be considered advice and we recommend seeking guidance and advice before making a final decision.
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Your Needs
Are you currently planning to take your pension? Select one option from Yes, I am, No, I'm not
You can access your pension pot any time from age 55 (rising to 57 from 2028) but you don't have to take it straight away and you don't need to take it as soon as you retire.
Do you plan to take any of your cash tax-free? Select one option from Yes, No, Not sure
However you decide to take your pension, you'll have the option to withdraw up to 25% of the total amount as a tax-free lump sum. You don't have to do this, but you only get one chance. If you don't withdraw the tax-free sum when you take your pension, you won't be able to do so later.
Remember, the more tax-free cash you take, the less you will have to buy a retirement income.
What do you plan to do with the rest of your pension pot? Select one option from I want to take all of the money now, I want to take the money out later, I want to receive the rest of the money as an income, I'm not sure what I want to do with the rest
You've said you plan to take up to 25% of your pension pot tax-free. Next, you need to think about what you want to do with the rest of the money in your pension pot.
When making any decisions about how to take your pension, you should think hard about your retirement goals, other assets you have available, the tax implications and how long you will need the money to last.
What do you plan to do with your pension pot? Select one option from I want to take all of the money now, I want to leave the money invested for later, I want to receive the money as an income, I'm not sure how I want to take the money
If you don't take any of your tax-free cash, you'll have your entire pension pot available to use. When making any decisions about how to take your pension, you should think hard about your retirement goals, other assets you have available, the tax implications and how long you will need the money to last.
Do you want your income to be guaranteed or flexible? Select one option from I want a guaranteed income, I want to be flexible with my income
With a guaranteed income, you'll agree the income and payment period at the start of the plan, meaning you can budget against a set income, confident in how much you will receive and for how long you'll receive it. However, you won't be able to make any changes once you've started receiving the income.
Other options allow you to be more flexible. Usually, the money will remain invested but available for you to withdraw as and when you need it. This means the value of your pension pot can go down as well as up, depending on how the market is performing. You'll also need to make sure you manage your withdrawals to make sure you have enough money to live on.
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Your Options
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.
- Leaving your pension pot alone could mean that you get a higher income when you take it later
- Your pot remains invested, so its value isn't guaranteed and will go up and down
- You should check that how your pot is invested is still appropriate, and that there are no special features, guarantees or bonuses that you'll lose by taking your pension pot later.
- You might want to review your retirement age in your account.
When the time comes to take your pension, you'll have a few options available to you. Use our Retirement Income Calculator to get a feel for how much income you could receive from each of the products we offer.
Pension Wise from MoneyHelper
Deciding how to take your pension is an important decision. Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
Not sure what the right decision is? Get guidance or take financial advice.
Pension Wise from MoneyHelper
Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
Book a free Pension Wise appointment
Unbiased
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.
More help and guidance
You can also use our Retirement Income Calculator to get an idea of how much income you could receive from each of the options we offer.
Not sure what the right decision is? Get guidance or take financial advice.
If you want to take your tax-free lump sum, you'll need to use your pension pot(s) to buy an income or drawdown product. But if you're not sure which product is right for you, the resources below could help.
Pension Wise from MoneyHelper
Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
Book a free Pension Wise appointment
Unbiased
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.
More help and guidance
You can also use our Retirement Income Calculator to get an idea of how much income you could receive from each of the options we offer.
Taking the money out later
If you want to take your tax-free cash now, then take the rest of the money later, there are a few options you should consider exploring.
With all of these options, any income you receive apart from your tax-free cash allowance will be treated as earned income and taxed accordingly.
| To consider | More information |
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Getting a guaranteed income for a set period with a lump sum at the end. |
If you don't want to leave your money invested, you could buy a guaranteed income product (often called a 'fixed term annuity') that gives you a fixed lump sum at the end of a set period. During the set period you can choose to take no (or a small) income. So, you'll know when you'll get your lump sum and how much it'll be. You can then decide what to do with the lump sum later. |
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Taking a flexible income using flexi-access drawdown or pension drawdown. |
Moving your pension into drawdown means the money will remain invested to be taken as an income, or as you need it. Leaving your money invested gives it more chance to grow, but it could go down in value too. |
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Taking the money from your pension as a series of cash lump sums. |
If your pension plan allows it, you can leave your money invested where it is and withdraw it as cash lump sums when you wish. Leaving your money invested gives it more chance to grow, but it could go down in value too. |
When taking your money using these methods, it's up to you to manage how much you're withdrawing from your pension to make sure you balance how much money you need to fund your lifestyle, while making sure it doesn't run out too early.
When considering how to take your pension, you should weigh up all your options to make sure you're choosing the right one for you. Find out more about your retirement options and how much you could get with each, using the links below.
Pension Wise from MoneyHelper
Deciding how to take your pension is an important decision. Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
Taking all of the money out now
You can take all of the money from your pension at once, but there are tax implications that you should consider, and it's worth keeping in mind that you'll be responsible for making sure the money lasts or that you have other ways of funding your retirement.
| To consider | More information |
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Taking all of the money now by cashing in your pension pot. |
When you cash in your entire pension pot, only up to the first 25% is tax-free. The rest is taxed as income in the year you take it. The tax will be charged under an emergency tax rate, which may mean that the tax deducted from the payment is greater than it should be. You can reclaim any excess tax deducted from HMRC. |
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Getting a guaranteed income for a set period. |
If you don't need to take all of the money at once, it may be more tax-efficient to take an income over multiple tax years. Many pension products will allow you to do this, but another way of taking the money over several years is with a product that gives you a guaranteed income for a set period (often known as a 'fixed term annuity'). |
When considering how to take your pension, you should weigh up all your options to make sure you're choosing the right one for you. Find out more about your retirement options and how much you could get with each, using the links below.
Pension Wise from MoneyHelper
Deciding how to take your pension is an important decision. Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
Taking the money flexibly
If you want to take take the money flexibly, there are a few options you should consider exploring.
Keep in mind that, with all of these options, any income you receive apart from your tax-free cash allowance will be treated as earned income and taxed accordingly. Leaving your money invested gives it more chance to grow, but it could go down in value too.
| To consider | More information |
|
Taking a flexible income using flexi-access drawdown or pension drawdown. |
Moving your pension into drawdown means the money will remain invested to be taken as an income, or as you need it. |
|
Taking the money from your pension as a series of cash lump sums. |
If your pension plan allows it, you can leave your money invested where it is and withdraw it as cash lump sums when you wish. |
When taking your money using these methods, it's up to you to manage how much you're withdrawing from your pension to make sure you balance how much money you need to fund your lifestyle, while making sure it doesn't run out too early.
When considering how to take your pension, you should weigh up all your options to make sure you're choosing the right one for you. Find out more about your retirement options and how much you could get with each, using the links below.
Pension Wise from MoneyHelper
Deciding how to take your pension is an important decision. Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
Getting a guaranteed income
You can choose how long you want your income guaranteed for.
| To consider | More information |
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Getting a guaranteed income for life with a lifetime annuity. |
With a pension annuity, you’ll know exactly how much you’re getting for the rest of your life. You can set whether you receive a fixed level of income or one that increases each year, and the income can continue for your dependant if you die before they do. Remember, though, that once you start taking a pension annuity, it can’t be changed. |
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Getting a guaranteed income for a set period (with the option of a lump sum at the end). |
This type of product, often known as a fixed-term annuity, can pay you a guaranteed income for a period of your choosing. You can choose if you want a lump sum at the end. This can be a tax-efficient way to take the money from your pension pots while waiting for another source of income to start. |
When considering how to take your pension, you should weigh up all your options to make sure you're choosing the right one for you. Find out more about your retirement options and how much you could get with each, using the links below.
Pension Wise from MoneyHelper
Deciding how to take your pension is an important decision. Pension Wise, the Government’s free and impartial service for over 50s, offers guidance to make money and pension choices clearer.
How much income could you receive?
Use our Retirement Income Calculator to find out how much your annual income could be using our suite of products, plus the tax impact of taking it all as cash.
Your retirement options explained
Our 3 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.
