Am I getting the most from my pension?
Evaluate your pension, charges, contributions, and retirement options.
8 Nov 2024 | 6 min read
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Options at retirement
Understand the main ways to take money from your pension, how each option works, and what to consider before you decide.
Lifetime annuity, guaranteed income for life
A lifetime annuity converts your pension pot into a regular income paid for the rest of your life. You buy it from an insurance company and receive a set amount monthly, quarterly, or annually regardless of how long you live.
Rates vary significantly between providers, so comparing the whole market is essential. Factors like your health, age, and whether you want the income to increase with inflation all affect the rate you can get.
Guaranteed income for life, no matter how long you live
Compare the whole market to understand available rates
Health, age, and inflation protection all affect what you receive
Fixed-term annuity, guaranteed income for a set period
A fixed-term annuity pays a guaranteed income for a chosen number of years rather than for the rest of your life. At the end of the term, you may also receive a maturity value that can be used to review your options again.
This can suit people who want certainty for a defined period while keeping flexibility later on. The terms, maturity value, and death benefits vary between providers, so the detail matters.
Guaranteed income for a fixed number of years
Can include a maturity value to review options at the end of the term
Useful when you want short-to-medium-term certainty with future flexibility
Drawdown, keep your pension invested
Pension drawdown lets you keep your money invested while taking an income as and when you need it. Your remaining pot continues to grow (or fall) depending on investment performance.
This offers flexibility because you control how much you take and when. But there is no guarantee your money will last as long as you need it to. Managing withdrawals carefully is critical.
Keep your pension pot invested and growing
Take income on your own terms: as much or as little as you need
No guarantee income lasts. Careful ongoing management is needed
Taking lump sums from your pension
You can take your pension as a series of lump sums. Each time you take money, 25% is tax-free and 75% is taxed as income. This is known as an Uncrystallised Funds Pension Lump Sum (UFPLS).
Alternatively, you can designate a portion of your pension into drawdown, take the tax-free cash upfront, and leave the rest invested. Timing matters: taking large sums in a single year can push you into a higher tax bracket.
25% of each withdrawal is tax-free under UFPLS rules
75% is taxed as income. Timing and sequencing matter
Large lump sums in one year can push you into a higher tax bracket
Combining options for flexibility
Most people don't have to choose a single option. You can use part of your pension to buy a lifetime or fixed-term annuity for essential income, and keep the rest in drawdown for flexibility. This blended approach can give you security and control at the same time.
A regulated adviser can model different combinations, show you tax implications across each scenario, and help you build a plan that matches your lifestyle and risk tolerance.
Mix annuity security with drawdown flexibility
Guaranteed income for essentials, flexible access for everything else
A regulated adviser models each scenario and its tax implications
The Cost of Delay
Every day you wait costs you income. See exactly how much.
£
Estimated income lost by waiting
£3,550income missed over 6 months
£8,100
Income now (annual)
£8,200
Income after delay
£100/yr
Extra per year by waiting
40.5
Years to break even
By waiting 6 months you gain £100/yr extra, however you'd need to live 40.5 years just to recover the £4,050 you missed by waiting.
For illustrative purposes only. Figures assume a level single-life annuity, no inflation protection, and that pot size and annuity rates remain unchanged. This is not financial advice please speak to a qualified adviser.
Other Guides
More resources to help you plan your retirement
How drawdown works and what to watch out for
A practical guide to pension drawdown - how to manage withdrawals, investment risk, and sequencing.
12 Nov 2024 | 6 min read
Enhanced annuities - could your health pay off?
If you have a health condition or lifestyle factor, you may qualify for a higher annuity income.
15 Nov 2024 | 4 min read
FAQs
Common questions about retirement options
Reviewed for accuracy: . This guide is general information, not a personal recommendation. Pension and tax rules can change, and suitability depends on your circumstances.