Retirement – What are my Options?

Retirement Planning

Approaching retirement can be an exciting but daunting time. So when it comes to choosing what pension option to take, you’ll want to be sure you’ve made the right choice.

Simply Financial Advice can help you with that decision making, we’ll happily sit down with you, look carefully at your circumstances and aspirations and help put together a tailored plan that will suit you.

In the meantime, we’ve put together a quick guide as to your options at retirement when it comes to utilising your pension pot.

So, what are the basic options available to you?

1.Leave your pension pot untouched. This may be an option if you’ve already enough income to live on, be it from employment or from savings and investment income. By delaying taking your pension pot, this will allow your pot to continue to grow tax free until you need it.

2. Buy a Guaranteed Income for Life. Known as an Annuity, you will be provided with a regular retirement income for life and with the guarantee that your pension pot will not run out before you die. There are different types of annuity and so it’s important that you get the right one that will be suited to your personal circumstances.

You can choose to take up to 25% of your pension pot as a one-off tax-free lump sum at outset and use the rest to buy an annuity. The annuity must be purchased within 6 months of taking the tax-free cash lump sum. Alternatively, you can use the whole amount to purchase an annuity and forego the tax-free cash lump sum.

3. Choose Drawdown. Drawdown often referred to as Income Drawdown is the option to keep all or most of your pension pot invested and draw a variable income from it.

Like the option above, you can still choose to take the 25% tax-free cash lump sum but then you move the remaining amount to a fund that allows you to take an income from it i.e monthly, quarterly, yearly or irregular withdrawals. It is important that you move the remaining pension pot into a suitable fund within 6 month as if you fail to do so, you will be liable to pay tax on the lump sum (usually 55%).

4. Take small cash amounts. Another option is to take cash from your pension pot, as and when you require. You’ll use your pension pot like a savings account whilst it is invested where it can grow tax free. For each cash withdrawal, the first 25% is tax free and the rest taxed at your highest rate by adding it to your existing income.

5. Take all your pension pot as cash. Recent reforms in the pension laws means that you no longer have to convert your pension pot into a regular income if you so wish. Cashing in your pension pot will not give you a secure retirement income and this should only be done after looking at all the advantages and disadvantages and seeking professional financial advice.

6. Finally, you can mix your options taking cash and income at different times to suit your needs.

If you wish, you can leave your pension pot invested until age 75 and continue to receive tax relief.

All of the above options have pros and cons and that’s why it is so important to ensure you get professional financial advice before making any final decisions. Simply Financial Advice can assist you in this instance, so please don’t hesitate to get in touch. Call 0800 044 5733 or complete the form below and we will be in touch as soon as we can.


Where did you hear about us?