Retirement is something we save up for our whole working life. Make sure you use it wisely as it has got to support you for the rest of your life.
Normally, you can take a 25% lump sum from your pension pot at the age of 55. You then have six options of how to use the remainder of your pension.
When you reach the selected retirement age, you don’t have to start taking money from your pot, you can leave it to continue growing until you are ready to retire.
The remainder of your pot, after the 25% lump sum, can be used to buy an insurance policy that guarantees an income for the rest of your life. There are different options to choose from but you must be aware this income will be taxable. Get advice from a financial advisor who has back office systems for IFAs https://www.intelliflo.com/.
Invest your 75% pot to get a taxable, regular income. This is known as flexi-access drawdown. You can adjust when you take it and how much income you take. This income is not guaranteed for life, so your investments need to be managed carefully.
Don’t take your lump sum, just take small amounts of cash from your pension pot when you need it. The first 25% will be tax-free and the remainder will be taxable income. This is not offered by all pension providers, and there is a charge every time you withdraw cash. Taking cash from your pot could affect your entitlement to any benefits.
You can take your entire pension pot in one go. 25% will be tax-free, the remainder taxable. The problem with doing this is you will pay a large tax bill, you won’t have a regular income, and once the money has run out you will have no money to support you. This could also affect any benefits you may be entitled to.
You can mix the pension options, e.g. use some to get an adjustable income and some to buy an annuity. You can mix and match, taking an income or cash at different times. You would need a fairly large pension pot to be able to take this option.
Speak to a financial advisor before deciding on any of these options.