Your choices

You have a number of choices about how to take your pension benefits.


you must decide how much of your Retirement Account (up to a maximum of 25%) you want to take as a tax-free cash lump sum.


you must decide how you want to use the balance of your Retirement Account (75% or more) to provide a taxable income. There’s a lot of flexibility in the way you can take your income:

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 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.

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.