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What can I do with my pension pot now?

27th April 2015

Following changes from April 2015 you now have increased choice and flexibility over how and when you can take money from your pension pot.

Your choices at 55 from 6th April 2015

What can I do with my pension pot

Find out More Retirement options »

Taking your pension from April 6th 2015

You must have reached the minimum pension age to access your pension pot - currently 55 (or earlier if in ill health or if you have a protected retirement age).

Changes introduced in April of this year have given freedom over how you can use your pension pot(s) if you're 55 or over and have a pension based on how much has been paid into your pot (a defined contribution scheme).

You can now tailor when and how you use your pension; whether you plan to retire completely, to cut back your hours gradually (phased retirement) or to carry on working for longer.

There's more choice than ever when working out the best retirement option that will provide you and any dependants with a tax-efficient income throughout your retirement.

Pension Pot options

You don't have to choose one option when deciding how to access your pension - you can mix and match as you like, taking cash and income at different times to suit your needs. You can also keep saving into a pension if you wish, and get tax relief up to age 75.

Under the new pension rules you can chose one or many of the options below:

1. Leave your pension pot untouched

You may be able to delay taking your pension until a later date. That way your pension pot can continue to grow tax-free, potentially providing an increased income once you access it.

2. Use your pot to buy an annuity (an income for life)

You can choose to take up to a quarter of your pension pot as a one-off tax-free lump sum then convert the rest into a taxable income for life called an annuity.

There are different lifetime annuity options and features to choose from that affect how much income you would get.

3. Use your pot to provide a flexible retirement income (flexi-access drawdown)

You can take up to 25% (a quarter) of your pension pot or of the amount you allocate for drawdown as a tax-free lump sum, then re-invest the rest into funds designed to provide you with a regular taxable income.

You set the income you want. Unlike with a lifetime annuity your income isn't guaranteed for life so you need to take great care when managing your investments.

4. Take small cash sums from your pot

Using your pension pot like a savings account is another option. You can take cash out when you need it, leaving the rest untouched where it can continue to grow tax-free.

For each cash withdrawal the first 25% (quarter) is tax-free and the rest counts as taxable income.

5. Take your whole pot as cash

You could close your pension pot and take the whole amount as cash in one go if you wish. The first 25% will be tax-free and the rest will be taxed at your highest tax rate

This option comes with many risks! You may leave yourself open to a large tax bill and run the risk of running out of money and having nothing to live on in retirement.

Get help or advice on your pension

If you're 55 or over and thinking of taking all or part of your pension, come and talk to one of our advisers so we can help you understand all of the choices you have. We can then recommend the best pension strategy and help you find the most competitive products.

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