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Planning for retirement

Your pension options at retirement

What to do with your pension is a big decision; get it right and you could change your life for the better – both now and in the future.

Every option has different features, though, and getting to grips with the pros and cons of each is key to better understanding which one could be right for you. Our quick and easy guide below is a great starting point, giving you the basic information you need should you choose to have a more in-depth conversation about your pension options.

Options in brief

Annuity

With an annuity, you are selling your entire pension fund to an insurance company who in return promises to provide you with a set level of income until the day you die.

Part annuity, part pension drawdown

You can sell a portion of your pension to buy an annuity and be sure of a guaranteed income for life. Keep the remainder invested in a pension drawdown plan with the aim of growing your fund and/or taking taxable cash lump sums as and when you choose. This option also enables you to pass on remaining funds to beneficiaries on your death.

Pension drawdown

With this type of plan you retain ownership of your pension fund and keep it invested. You can then take money from this fund as and when you choose, varying the amount to suit your specific needs, and passing on any remaining funds to beneficiaries on your death.

Cash in your entire pension

You can take all of your pension fund in one go: 25% will be tax free and the remaining 75% will be taxed at your marginal rate. Choose this option and you will no longer have a pension.