Converting your pension savings into an income
Whether you plan to retire fully, to cut back your hours gradually or to carry on working for longer, you can now tailor when and how you use your pensions to fit with your particular retirement journey.
It’s a misconception that all pensions will automatically pay you an income when you reach retirement age.
Any final salary/ defined benefit pension schemes that you might have will start to pay you an income (guaranteed for life) in line with the rules and dates set by the scheme.
But with any personal or defined contribution workplace pensions you have, you’ll have to make some conscious decisions about how to convert your pension savings into a retirement income. In essence you can:
• buy a guaranteed income for life (an annuity)
• take a flexible retirement income (drawdown)
• take a tax-free lump sum (or series of lump sums) and leave the rest invested in a fund for future use (drawdown)
• take your whole pot(s) as cash
• mix your options with a combination of any of the above.
Planning for retirement can be complex, and for many people a daunting task. But there are resources at your disposal. Take a look at the Advice and Guidance section of this site to find out what help is at hand.