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.

Lisa Webster explains the options available when you access your pension

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.

To help you find the best provider for accessing your pension, it can be a good idea to shop around. If you need any help doing this, the Money Advice Service website provides some useful information.

Pension wise

Pension Wise

Pension Wise is a free, impartial government service that offers advice to anyone approaching retirement. If you want to better understand the retirement options available to you, Pension Wise can help. Visit our Pension Wise page to learn more about Pension Wise and how to use it. You can also find out more about your retirement choices by reading our benefits guide.

 Tax free cash and pension drawdownLump sums or UFPLSTax 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 itYou take lump sums from your pension, which are part tax free and part taxedYou 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 moneyYou 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 moneyYou 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?NoNoYes
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 taxFor each lump sum 25% is tax free and 75% is taxed as income taxYou 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 takeYes. You decide how to invest the pension fund and what lump sums to takeNo
What happens when I die?The remaining fund is paid as a lump sum or income to your nominated beneficiariesThe remaining fund is paid as a lump sum or income to your nominated beneficiariesDeath benefits will be paid as set out in the annuity contract
Does AJ Bell Youinvest offer this option?YesYesNo, but we will pay the tax free cash to you and purchase your chosen annuity
Find out more

Guide to drawdown
Tax free cash
Pension drawdown

Lump sumsTax free cash
Annuities

Watch out for pension scams.

Whichever pension option you choose, you need to be sure it's your choice. Scammers may target you with false promises and pressure you to access your pension. Be wary if you're contacted by email, phone, text or in person about withdrawing your pension pot.

Find out more about pension fraud

10 point retirement checklist

- 10 actions to take now

Pension wise

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