Deciding how you are going to take your retirement income is
probably one of the most important decisions you will need to
Following the introduction of the Government's new pension
freedoms, it's important that you take the time to look into all of
the options available to you. There will be lots of different
factors to consider, so it's important that you do your research
and also seek advice from your financial adviser or receive free
guidance from the Pension Wise service.
further information on the new pension freedoms, visit the Pension
Wise website >
How much will I get in retirement?
Your pension provider should write to you annually and
also in the lead up to your retirement date with details of your
pension forecast. Once you know the value of your pension fund, you
can then look at which option(s) will provide you with the best
Most people choose to buy a lifetime annuity with their
pension savings which provides them with a guaranteed income for
the rest of their lives. It pays to get it right - shopping around
for the best annuity rate can boost your income by 20% or more, and
once you've bought a lifetime annuity you generally can't change
Some people who prefer more flexibility and are willing to take
more investment risk with their pension pot, may choose income
drawdown. This means that you can take an income from your pension
pot while the rest of the money stays invested. This option allows
you to be more flexible with how much income you take, but it also
means that your pension pot may not last for the full length of
The new pension freedoms allow you to take the value of
your pension fund as a lump sum which leaves it up to you as to how
quickly you spend it and what you spend it on.But there are tax
consequences to consider with this route, so take advice if you are
In addition to your pension pot, you should also consider
what other sources of income you have, including any State Pension,
other savings, investments or assets.
What do I need to look for?
You should consider carefully what type of income you will
- Do you want your income to increase yearly to help to counter
the effect of inflation?
- Do you want the income to continue until you die?
- Do you have a spouse who you would like the income to continue
being paid to if you die?
- Do you suffer from poor health?
- Will you take a tax free cash lump sum from your whole pension
pot before buying your annuity?
- Do you want to draw an income but leave the rest invested?
- Do you want a guaranteed income for life or are you open to
some investment performance risk?
Your answers to the above questions can considerably change the
amount of income you could receive and will vary between different
Where can I get some help and more
In conjunction with the new pension freedoms, the
Government has launched a free and impartial service called Pension
Wise which will help you understand what your options are and how
to make sure you get the best deal. This includes receiving free
face-to-face guidance through the Citizen's Advice
Find out more
about Pension Wise>
For further reading, you may also like to visit The Pensions
Advisory Service website as well as the
Money Advice Service.
For personal, professional advice you may find it useful
to speak with a financial adviser. They can help you through the
entire retirement planning process and make recommendations to help
ensure you receive the best possible retirement outcome.
New Pension Rules
As of April 2015, you now have the option to take your
entire pension pot as one lump sum to spend as you wish. Whilst
this may seem appealing, it's important to remember that only 25%
is tax-free - you will have to pay tax on the other 75%.
You can find out more about the new rules and how
they may affect you here »
The Money Advice Service has a very comprehensive
section about pensions and retirement. You will be able to find a
lot of information about different annuities, tax free cash lump
sums, rules and regulations and a retirement checklist.
You can find more information about the State
Pension and get your online statement here »
The Pensions Advisory Service offers a wealth
of information about your options at retirement and they also
provide a free telephone service to offer support and
The Citizens Advice Bureau provides a large amount
of free information and resources to help you with your
pension. They are also responsible for delivering the new
pension guidance as part of the Government's pension freedom
Getting Financial Advice
Professional financial advice could help you with your
retirement planning, tailored to your individual circumstances
- you can
search for an adviser local to you here »
Your adviser will look at your entire financial circumstances
and recommend a plan of action to achieve your individual
more about financial advice, what to expect and how much it will
cost here »