• There's now more freedom in how you can take your pension benefits

  • Options available at retirement

    Anyone aged 55 or over now has greater choice in how they use the money they've been saving in their pension.

     

  • Couple-at-PC

    What are my options at retirement?

    You can start taking pension benefits when you're 55, in one or more of the following ways:

    • Take all or part of your pension as a lump sum, known as Uncrystallised Funds Pension Lump Sum (UFPLS)
    • Take up to 25% of your pension as a tax free lump sum and use the remainder to:
      • Purchase an annuity (a guaranteed income for life)
      • Invest in pension drawdown.
      • take as a lump sum using the small pots rule (where eligible)

    Remember to 'shop around' if you want to access your money. Other products could be more appropriate for you and your circumstances and you could get a higher retirement income from another provider. The Money Advice Service offer a range of guides and tools to help you decide upon the best option for you, including a comparison tool and also a useful ‘Your money – it’s time to choose’ guide to retirement options.

  • Frequently asked questions

    You can normally take up to 25% of your pension fund as a tax-free lump sum. The reduced balance can then be used to buy an annuity or to start a drawdown pension. 

    An annuity is a policy you can get from an insurance company. You give them all or part of your pension fund to effectively buy the policy in exchange for a guaranteed income for life.

    The amount of retirement income you receive from an annuity is influenced by a number of factors including age, the options you choose, your lifestyle and your health. You could get a substantially higher retirement income if you shop around and find the best deal. See our annuities page for details.

    If you take a tax-free lump sum you can use what’s leftover to buy an annuity. The guaranteed income would then be taxable as pension income through PAYE. Please bear in mind that some insurance companies require that you have a minimum pension amount to buy an annuity.  

    You can use all or part of your pension fund to take an income, and if you take a tax-free lump sum, you can use what’s leftover to go into drawdown.

    You can choose to vary how much income you take and how often, until the money runs out. Whatever you don’t take as income stays invested, so it can rise and fall over time. Depending on how much you withdraw, the investment returns and the charges, you may run out of money before you die. You will therefore need to review your pension and make further decisions in the future.

    The income you take is taxable as pension income through PAYE and the amount payable is dependent on your personal circumstances.

    Different providers can offer different options when you are in drawdown and you should shop around for the most appropriate product for you and your circumstances. 


    Uncrystallised means you haven’t yet used or allocated the pension fund, or a particular part of the fund to take any benefits. For example, if you only allocate part of your total fund into a drawdown pension or to buy an annuity, what’s leftover is ‘uncrystallised’.

    You can take a one-off lump sum, or series of lump sums, and 25% of each will normally be tax-free. You’ll be taxed on the rest of the lump sum as pension income through PAYE and the amount payable is dependent on your personal circumstances.

    Should you take your entire pension fund as a one-off lump sum you may have to make your money last for the rest of your life.

    You may be able to take the whole of your pension as a small pot if you're at least 55, or retiring earlier due to ill health, and the value of the pension in question does not exceed £10,000.

    You do not have to take into account any other pension benefits you have when taking a pension as a small pot. The government will allow you to take up to three pension arrangements under the small pots rule.


  • Useful information to help you

    View our Pension Benefits Guide

    Access our Pension Benefits Guide for more detailed information on the options available to you through our range of products.

    Getting advice

    It's important to think carefully about your financial options when you plan for retirement. An adviser can help you understand your options and recommend the best path for you. 

    If you don't have a financial adviser you can use unbiased.co.uk to find one local to you.

  • Getting help and advice

    Choosing a retirement option is a big decision so we recommend that you get guidance or advice to help you to understand your options.

    Pension Wise is a government backed service available to anyone over the age of 50. The service is free and provides impartial guidance appointments over the telephone and/or face to face to help you to understand your options at retirement. It can offer you:

    • guidance on your pension options and how to make the best use of your pension pot
    • information about tax when taking money from your pension pot
    • tips on getting the best deal, including how to compare products, get financial advice and avoid scams

    We recommend you visit the Pension Wise website at www.pensionwise.gov.uk to find out what the service offers and to begin to understand the options available to you. To book a telephone or face-to-face appointment you can visit the Pension Wise website or call 0800 138 3944.