WHEN CAN YOU TAKE YOUR PENSION?
You have lots of flexibility when you come to access your pension.
Taking your pension
Once you reach age 55 you can access your pension pot. You can take some or all of it, to use as you need, or leave it so that it has the potential to continue to grow. From 6th April 2028, you will need to be 57 to access your benefits.
When you take your pension, some will be tax-free but the rest will be taxed.
Please be aware that tax treatment depends on your individual circumstances which can change. Tax rules may also change in the future.
What are my options when I take my benefits?
It’s up to you how you take benefits from your pension pot.
You can take your benefits in a number of different ways.
You can choose to buy a guaranteed income for life (an annuity). You can take some, or all, of your pension pot as a cash lump sum, or you can leave it invested.
However you decide to take your benefits, you'll normally be able to take 25% of your pension pot tax-free. The rest will be subject to tax.
For more information on your options, see below.
It’s good to have choices when it comes to pensions and your retirement, but it’s also important to understand all your options and any impact your decision may have on your future. You don’t have to make a decision on what to do with your pension pot now, but it’s worth thinking ahead so you’re ready when you do.
How long will my pension pot last?
How long your pension pot lasts will depend on the choices you make. You’ll be able to access the money within your pension pot in a number of different ways.
Here are some of the options to help you think your pension strategy through. You don’t have to stick to just one option, as you could combine several.
Buy an annuity and this will provide a guaranteed income for the rest of your life. With this option, the provider agrees to pay you a regular income until you die.
You can usually take up to 25% of the value of your pension as tax-free cash. Then you can use the rest to buy a guaranteed income for life (an annuity). Don’t forget, taking a lump sum first will reduce the amount available to buy an annuity, meaning your guaranteed income payments will be lower.
With an annuity, you may get more or less money than you put in depending on how long you live after your annuity has started.
After receiving tax-free cash, you can choose to designate the remainder of your fund to flexi-access drawdown, allowing you to leave your pension pot invested so that it has the potential to grow, or take lump sums or a regular income from it.
Unlike an annuity it doesn't provide a guaranteed income and you can end up with nothing to support you. You might decide not to take it all as income anyway, as you can purchase an annuity at any time with what's left. The level of income you take and any investment growth will be key factors as to how long your pension pot will last.
Take some or all of it in cash
Take all or some of your pension pot as a cash lump sum and it’s up to you how long it lasts. Once you get your money after tax, you’re completely responsible for it and can use it as you want - although please remember that although 25% of the amount you take is tax-free, you'll pay tax on the rest.
Leave it all for now – defer your pension
You could decide not to take your pension at your selected retirement date and leave it invested until you're ready to take your benefits. This would mean your pension pot would have the potential to grow, although this is not guaranteed. Just make sure you won’t lose any guarantees which only apply at your selected retirement date if you decide to leave your pension pot.