There are a number of ways you can use your defined contribution pension pot.
Got questions about how your pension can be paid?
If you need help making sense of how and when you can access your pension pot, you can speak to someone from Pension Wise, a free service from Money Helper.
Leave your whole pot untouched
You don’t have to start taking money from your pension pot when you reach the age your pension provider has recorded for you to retire. You can leave your money invested in your pot until you need it.
Want to give your pension a boost?
It’s Pension Awareness Day on Wednesday 15th September, so this week is the perfect time to assess your retirement income.
Take part in our free and flexible Couch to Financial Fitness plan to find out how it can help you build confidence to get the most out of your pension.
Start our Pension Week in the MoneyHelper Couch to Financial Fitness programme.
Guaranteed income (annuity)
You can choose to take up to 25% of your pension pot tax-free. You can then use the rest of your pot to buy an insurance product that guarantees you an income for the rest of your life – no matter how long you live. You can also get a guaranteed income for a fixed period.
Adjustable income
You can take up to 25% of your pension pot tax-free, and keep the rest of your pot invested to give you an income. You decide how much to take out and when. You can set up a regular income if you choose. How long it lasts will depend on how your investments perform and how much you take out.
Take cash in chunks
You can take smaller sums of money from your pot until you run out. Your 25% tax-free amount isn’t paid in one lump sum – you get it over time. 25% of each lump sum is tax-free, and the rest is taxed as earnings.
Take your whole pot in one go
You can cash in your entire pot – 25% is tax-free, and the rest is taxable.
Mix your options
You don’t have to choose just one of these options, you can choose to mix different options. This can give you flexibility to suit different needs at different times during your retirement.
For example, you could use one option at the beginning of your retirement – such as adjustable income. And you can use another option later – such as an annuity to get a guaranteed income.
If you have a large pot, you might be able to split it to provide some guaranteed income and leave some invested.
If you have more than one pension pot, you could choose different options for each pot.
You can also keep saving into a pension if you want, and get tax relief up to age 75.
Some providers offer products that mix two or more options.
