Accessing your pension

Your pension choices at retirement - we are here to help explain your options

What are my pension options?

You have saved hard to build a pension and now you’re approaching retirement you want to make the right choices. You may have a number of different pensions – both from employers and personal.

For personal pensions such as SIPPs there are three main options for accessing your pension – pension drawdown, taking lump sums or buying an annuity. You have the freedom to choose one option or mix and match. You don’t have to use all your pension fund in one go, so you can choose one option now for part of your fund and leave the rest to decide later – it is flexible.

Tax free cash and pension drawdown Lump sums or UFPLS Tax free cash and annuities
What is it? You take a tax free lump sum and leave the rest invested in your pension to provide an income, either on a regular basis or take the income as and when you need it You take lump sums from your pension, which are part tax free and part taxed You give your pension to an insurance company who pays you a guaranteed income for life
Who is it for? You need cash up front and are comfortable investing the balance so that it provides an income. You understand that investment returns are not guaranteed and that the fund could run out of money You want to withdraw your pension only as you need it and are comfortable investing the balance. You understand that investment returns are not guaranteed and that the fund could run out of money You want a guaranteed income for life and are not comfortable taking the risk of investing the pension fund yourself. You understand the costs involved
Is my income secure? No No Yes
How is it taxed? The initial tax free lump sum is normally 25% of the fund and the income you take from your drawdown fund is taxed as income tax For each lump sum 25% is tax free and 75% is taxed as income tax You can normally take 25% of the pension fund tax free and each annuity payment is taxed as income tax
Do I control the investments in the pension fund? Yes. You decide how to invest the pension fund and what income to take Yes. You decide how to invest the pension fund and what lump sums to take No
What happens when I die? The remaining fund is paid as a lump sum or income to your nominated beneficiaries The remaining fund is paid as a lump sum or income to your nominated beneficiaries Death benefits will be paid as set out in the annuity contract
Does AJ Bell Youinvest offer this option? Yes Yes No, but we will pay the tax free cash to you and purchase your chosen annuity
Find out more Tax free cash
Pension drawdown
Lump sums Tax free cash
Annuities

The Government Pension Wise service can help explain the options available to you and you may also want to consider using a suitably qualified financial adviser.

Watch out for pension scams.

Find out moreBe aware if you are approached by email, phone, text or in person about withdrawing your pension pot.

To find out more about your options, read our benefits guide.

If you are ready to withdraw some of your SIPP and understand the implications of doing so, then complete the SIPP benefit form – income drawdown and lump sum payments.

You can find out
more about your options at retirement using
the Government’s
free, impartial
Pension Wise service

Approaching retirement checklist
- 10 actions to take now


Read now

Open a multi-award winning SIPP

More on SIPPsOpen an account

Transfer to us

  • £500 towards cost of transferring
  • Deal from just £1.50
  • Award winning service
Find out more