What happens at retirement?

At some point you’re going to need to make a decision on your pension and how you use it for your retirement. But fear not, we are here to give you the most important options available in straightforward, no-nonsense language so you can make the best decision for yourself.

Leaving your pension untouched

If you’re still working and want to carry on contributing to your overall retirement fund, you can leave your pension where it is. It doesn’t matter if you’ve already reached your selected ‘retirement age’, there’s no rush to start drawing!

Purchase an annuity or guaranteed income

When you reach the age of 55 (or 57 from 2028), you can take 25% of your entire pension pot tax free and purchase an annuity or insurance policy that gives you a set (taxable) income for life. The amount you receive annually will depend on how much is in your pension pot, your age, health and whether you want it to pass on to spouse after you die.

Flexi-access drawdown

As before, you can take 25% of your pot tax free and then, with the remaining money, invest into different funds. Usually, your pension provider or an Independent Financial Adviser will offer you different investments with varying risk levels. You can then decide which investments are best for you and draw an annual (taxable) income from them.

Find out more on pension drawdown here.

Take your entire pension pot

Since 2015, it is now possible to take 25% of your pension pot tax free and then also the remaining taxable 75% in one go. After tax, you’ll have your entire pension pot in cash. But for most people, this is not tax efficient and potentially also quite risky as you may run out of money in later years.

Mix your options

You don’t have to restrict yourself to picking only one of the above options. For example, you may wish to take some of your pot as an annuity and then the rest as drawdown. If you have separate pension pots, you may want to leave some of your money where it is untouched and drawdown the remainder.

If this is the case, it may be worth speaking to a pension adviser. What should I do next? If you’re not yet ready to retire and want to leave your pot untouched, why not speak to one of our friendly pension professionals at Profile Pensions? Often, we find that people are paying inordinate amounts in ‘management’ fees for under performing schemes.

Our pension professionals give you impartial advice, help you switch to a scheme that suits you better and gives you better returns over time. We also provide annual ongoing advice to make sure that your pension pot is growing healthily over time.