My retirement
When you retire, you decide how you would like to use your pension account.
You have several choices to suit your retirement needs.
When you reach age 55 you can take your pension if you want to. But be careful, the earlier you take it the longer you will need to make it last.
Age 55 is the current minimum age the Government allow people to access a pension. This will increase to age 57 from April 2028.
When you come to take your pension, there are six ways you can do this.
Choices we offer
Leave your pension where it is
Your pension comes with a ‘Normal Retirement Age’ of 65. This is when we typically expect people to access their pension.
You don’t have to start taking money from your pension when you reach 65. You can leave it with us until you need it. If you do this, we'll keep adding bonuses to your pension each year.
Take your whole pension in one go
You can cash in your entire pension – a quarter is tax-free, the rest is taxed as income. This can be great if you have a smaller pension you just want to cash in, but if your pension is quite big you could face a big tax bill.
Choices with other pension providers
You can choose any of these options with another provider. You need to transfer your pension account to them, and they'll set this up for you.
As with most things, different providers offer different rates, so try and 'shop around' before committing and get a few quotes from different pension providers. If you aren't sure, a financial adviser can help (scroll down to find out more about this).
Adjustable income (called drawdown)
You can take a quarter of your pension tax-free at the start. The rest of your pension is invested to give you a regular income. You decide how much to take and when, and how long it will last.
Take cash in smaller sums
You can take smaller sums of money from your pension until you run out. A quarter of what you take is tax-free, the rest is taxed as income.
Buy a guaranteed income (called an annuity)
Use your pension to buy an insurance policy which guarantees you an income for the rest of your life – no matter how long you live.
Mix your options
You can mix different options. Usually, you need a bigger pension to do this.
Choices we offer
You can leave your pension with us for as long as you like. If you are still working, money will keep going in, and you can keep topping this up with AVCs if you want to.
The earlier you take it the longer you will need to live off it, so only take it early if you can afford to do this.
The longer you leave it the more chance your pension will have to grow with bonuses.
Your pension can be passed on tax-free if you die before age 75. After this, it is taxed as income.
You can take your whole pension in one go as cash. A quarter is tax free, and the rest is taxed as income.
This could push you into a higher tax bracket, which means you will pay more tax than you usually do for that tax-year.
Amount you'll get tax-free
You'll need to plan how to provide an income and make sure you have enough to last your lifetime, and whether you want to leave anything to someone when you die.
It's worth knowing what you will do with the money. If you leave it in the bank and inflation increases, it will reduce the spending power of your money.
Amount that is taxed
Choices with other providers
You can get a regular income that goes up or down. So, if you need more money in one year but less in another, you can easily plan for this.
Before you do this, you can take a quarter of your pension as a tax-free lump sum at the start. Your income after this is taxed.
As you get to pick how much you want and when you want it, your income is not guaranteed to last as long as you live. The more money you take out in the early years, the less is left for the future.
With this option, any money left when you die can pass on to your loved ones, in some cases tax-free.
Instead of a regular income, you can take cash lump sums until your money runs out. How much you take is up to you. If you want to take large amounts over a shorter period, you can easily do this.
A quarter of each amount you take is tax-free and the rest is taxed as income. In between taking money out the rest stays invested. This gives your money a chance to grow, but it can also go down.
With this option, any money left when you die can pass on to your loved ones.
A lifelong pension (also known as an annuity) provides you with an income that will last as long as you live. You can also get an income for a set number of years. If you want security instead of flexibility this is the option for you.
Before you buy an annuity, you can take a quarter of your pension tax-free. After this your pension will be taxed as income.
There are various types of annuity. The main features you can decide are how the pension will increase, whether you want to provide a pension for your husband, wife or civil partner when you die, and whether there is a minimum length your pension will be paid, for example 5 years.
If you smoke or have a medical condition, you may be able to get an ‘enhanced’ annuity.
Buying an annuity is a one-time, irreversible decision, but not one you necessarily need to make when you retire. You can move your pension into ‘drawdown’ first while you value financial flexibility and buy an annuity later in life when you value security of income more.
As you cannot change your mind once you have bought an annuity, and annuity prices vary significantly, shop around to make sure you get the best deal.
You don’t have to choose one option when deciding how to take money from your pension.
Mixing your options 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 flexible retirement income. And you can use another option later – such as an annuity to get a guaranteed retirement income.
If you have a large pot, you might be able to split it to provide some guaranteed retirement income and leave some invested.
If you have more than one pension pot, you might 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.
How do I access my pension?
When you are ready to access your pension, get in touch with us and let us know the date you wish to take it.
We will send you the information and forms you need. We can then put your chosen option into action. It can take up to 3 months to set everything up, so once you know your retirement date, start speaking to us.
Taking your pension and carrying on working
If you are still working, you can take your pension and continue in employment. You do not have to wait until you stop serving to take it. But, if you are thinking of taking your pension early, you will need to make it last longer.
If you are interested in this, think about which option suits you best. Most of the ways you can take your pension mean this is added to your income for the year. It is added to your salary and other income and is taxed depending on which tax band this puts you in.
If you take a larger amount from your pension while you are still earning, this can put you into a higher tax band, so a higher proportion of your pension will be taxed.
If you do take your pension and continue working, your employer still needs to contribute into a pension for you, as long as you still meet the automatic enrolment criteria.
If you take one pension, but you still need to save into another, we'll set you up with a new pension which you can take again later.
Before you do this, there can be a tax implication.
If you access your pension and save into another pension at the same time, you'll trigger a tax implication called the Money Purchase Annual Allowance (MPAA).
MPAA is the limit on how much you can save into one pension, while receiving money from another.
You'll trigger this if you access your pension in any of the ways above, except if you buy a guaranteed income (an annuity).
If you trigger this, you can only save £10,000 a year into your new pension before having to pay tax. If you are likely to save more than £10,000 into your new pension, think carefully about this before going ahead.
Ill health retirement
Facing the possibility of stopping work due to your health can be difficult. To help with life after work, you can apply to take your pension early.
What should I do if my health is affecting my work? First, talk to your line manager and/or employer about your concerns. They will try and find ways of helping you continue working. They will usually refer you to an occupational health adviser who will offer advice and guidance on how your condition can be managed.
If you are over 55
If you are over 55 and your health is preventing you from working, you can access your pension as normal.
The usual retirement options apply, but you might be able to get an enhanced annuity if your life expectancy is shorter.
If you are under 55
If you are under 55, and you are permanently unable to work due to health problems, you might be able to access your pension early.
As you will be accessing your pension before age 55, the minumum age the Government allow people to access a pension, we need evidence of your condition. This is known as an ‘ill-health’ pension.
It can take time to approve ill-health pensions, often up to 6 months. Some cases are straightforward, but some are complex, and we might need independent medical advice.
We will try and keep you informed as much as we can throughout the process.
If your situation is not straightforward, we might need help from our independent medical advisers. They might need to talk to your GP or medical specialist, or they may need to speak to you to carry out a short medical examination. They will only do this if they need more information to give their opinion. The examination will be over the telephone and at a time convenient for you.
Financial advice
Pension Wise will give you tailored help and highlight your choices, but they will not make specific recommendations, give you financial advice or help you set your pension up.
If you would like independent financial advice, head to our financial advice page to find out how we can help you find an adviser.