What is guaranteed is that, when you retire, you can choose to take tax-free cash of up to 25% of the value of the pension pot, with the remaining money available either as a flexi-access drawdown (unlimited access to your cash whenever you want) or as an annuity (regular guaranteed income payments for the rest of your life).
The way you can access your pension fund and the amount you have available depends on the pension scheme you have and the amount you access at 55.
If you're on a defined benefit pension (a pension scheme with a pre-determined income at retirement) you’ll receive a portion of your salary based on the number of years you paid into the scheme. These schemes will set an age at which you can start taking the full benefits from your pension – known as the ‘normal retirement age’. This age will vary depending on the pension scheme you’re enrolled in, and when you joined the scheme.
If you're on a defined contribution or final salary pension (pension scheme where the income in retirement depends on the value of your fund at your retirement age) in exchange for the money in your pot, an annuity provider will give you regular guaranteed income payments for the rest of your life. The advantage of an annuity is that it gives you a pre-determined, guaranteed income for the rest of your life. The disadvantage is that the income you get it determined at the outset so it can’t be adjusted if your circumstances change and currently rates are relatively low.
Your financial security at retirement is vitally important and there are experts out there that can provide you with all the information you need to make the right decision.