Your choices

You could take out an income drawdown policy, which would allow you to keep the money invested and take taxable income at a rate you choose over a number of years. The amount is not guaranteed and you need to make sure that it lasts as long as you need through your retirement. If you are in the Default strategy, at retirement your money will be ready to be moved to an income drawdown provider of your choice. The FuturePlanner Trustees have an arrangement in place with a workplace Master Trust pension scheme called Smart Pension to enable a smooth journey into income drawdown. Smart Pension has a retirement solution called Smart Retire that you can use if you want to (see further below).

You could purchase an annuity from an insurance company. The income would be guaranteed, but the actual amount will depend on the terms available from insurers when you come to make the purchase, together with the type of annuity you want. For example, do you want it to increase annually with inflation and do you want it to continue after your death and be paid to a spouse or partner?

You could take the cash out in one lump sum at retirement – an option which the government calls UFPLS (Uncrystallised Funds Pension Lump Sum). If you decide to do this, it could mean that you might pay a higher rate of income tax in the tax year.

It is possible to do something similar to this through an income drawdown policy but then taking the income over a short number of years.

You could take a mix of these different forms of taxable income, for example, some as a guaranteed annuity and some as flexible income drawdown.

If you elect to transfer to Smart Pension at retirement, they have a retirement solution called Smart Retire that lets you split your money across four different pots in a way that suits you best:

• A ‘flexible income’ or ‘drawdown’ pot providing a flexible monthly income in the early years of your retirement
• A ‘later life’ pot, which you can use to buy an annuity later on, if you want the security it provides
• An ‘inheritance’ pot, so you can leave some money behind for your loved ones
• And a ‘rainy day’ pot that you can dip into when you need to.

You can find out more about Smart Retire here. Remember, there are many other retirement providers and you can select one of your own, rather than Smart Pension, if you prefer.