After years of saving into your pension pot and you’ve decided that you want to retire, you’ll need to decide what you want to do with the money. You can normally start taking your income from age 55. There are two main options for you to choose from:
- An annuity – where you use your pension pot to buy a guaranteed income that will be paid to you for the rest of your life. You can still take your tax-free lump sum and use the rest to buy an annuity.
- Income drawdown – the main difference to an annuity is that the money remains invested and you simply take a pension income directly from it. This is the most flexible way to take your pension income. Again, you can still normally take up to 25% of your pot as a tax-free lump sum.