There are a variety of ways you can take your pensions savings as an income. Most people wait until their State Pension Age or their Target Retirement Age to access their pension, though you can do this any time after 55 (or 57 from April 2028).
You can tailor your choices to suit your income needs and, unless you buy an annuity (a secure income for life), you can also change how you take your money. Log in to look at the retirement guide for more help.
Which income type is right for you?
When deciding what to do with your retirement savings, you should consider:
- How much you may be taxed
- Outstanding debts you may have
- Possible illness or big life events
You can mix income choices to best suit your lifestyle needs, including:
- Taking the whole of your Pension Account as cash
- Taking a flexible income
- Buying an annuity (a guaranteed, secure income)
- Taking multiple lump sums
- Doing nothing for the time being
25% of it is usually tax-free but the rest is subject to income tax at your highest rate, so you may end up paying more tax than you’re expecting. You should also consider whether the amount you receive after tax will be enough to last you for the rest of your life. This will depend on:
- Your other sources of income
- How much you get from the State Pension
- How long you expect to live for
- What living standards you expect in your retirement
Often called drawdown or income drawdown. You can take smaller lump sums from your Pension Account as and when you need them, leaving the rest invested. You’d get the same 25% tax-free allowance, but you can take the relief as one amount or share it evenly across every lump sum. You should consider:
- How long you expect to live and whether your Pension Account will last
- How to invest the remaining money - riskier investments could go down
- What tax band it would put you in
You can use your Pension Account to buy an annuity with an insurance company. You can choose whether the income increases over time, and whether it is paid to a dependant when you die. It’s wise to shop around to get the best deal and find the annuity that best suits you - visit MoneyHelper for further help. You should consider:
- You can’t change an annuity once the income starts
- Annual increases and dependants' benefits increase the annuity cost, lowering the income
- If you don’t live as long as expected, you may not get good value from the annuity
Still not sure what the right choice is?
We have partnered with HUB Financial Solutions, an impartial retirement specialist team, who will talk you through your choices and give you guidance on the different retirement options and next steps. It’s free to use - visit the website to find out more.
Use our tools to plan
Our Retirement calculator and tax planning tools work out how much you might get when you retire, for how long, and how much you may be taxed. Please note, the tax planner link goes to another website hosted by HUB Financial Solutions.
Made a decision?
You can easily tell us what your choices are or if you would like to change your income online. Just log into your online Pension Account and use the online income request tool.