What choices do I have in retirement?

Flexible Drawdown

25% Cash lump sum tax free
The amount you can withdraw in any one year is flexible, however it will be subject to tax thresholds.

A state pension in addition to personal pensions plus any employment pensions along with any trust payments and dividend payments are calculated as an accumulative total.
Tax thresholds set annually through the budget announcements. You cannot make payments into any other pension scheme during the same tax year

Annuities


A retirement income available for the remainder of a retirees life.
Eligible to buy an annuity from the age of 55
Income from an annuity is added to your state pension plus any other sources of income. The tax evaluation is made on your entire annual income.
Standard annuities are a 1 shot deal, once entered into, they are fixed until the end of your life with the exception of fixed term and with profit annuities.
25% Cash lump sum tax free

Pension Cash Pot

You now have the option to take your entire pension pot as cash lump sum.

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The first 25% is still tax free, the remaining amount will be taxed according to UK thresholds for the existing tax year of withdrawal.


If your pension fund was £40,000, you could take £10,000 tax free.

Imagine your state pension was approx. £6,000 and your £30,000 remaining pension pot to this and the total income for the year would be £36,000.

The tax you would pay on this amount would be just over £5,000. Therefore it would be prudent to opt for a flexible drawdown plan any pay the income out over a few years to reduce the tax hit.