Do you understand your retirement options and how to make the most out of your pension savings?

3 minutes

Our research tells us over a third (35%) of pension holders know nothing about the different options available for when the time comes to retire. It’s a complicated topic but choosing what to do with your pension is one of the most important decisions you’ll ever make.

Do you know what your options are when the time comes to retire?

Of the pension holders we surveyed*:

  • Only a third (33%) of those planning to retire in the next 5 years understood how to ensure they didn’t run out of money in retirement
  • Just under a quarter (24%) knew how they could take their pension tax efficiently
  • Almost two thirds (61%) weren’t planning on getting advice at retirement. 

What are the options? 

You’ll usually be able to access 25% of your pension pot tax-free. If you decide to do this you’ll need to decide what to do with the remaining 75%. Here are a few options for you to think about:

  • Leave it invested - If you don’t need to use your pension pot to give yourself a regular income, you can leave it invested. This means you can continue to save and your pension pot may grow. But, as with all investments, there’s a risk that the value can go down as well as up. 

  • Take it all in one go - If you take your whole pension pot in one go, while 25% of your pot would be tax-free, you will pay tax on the rest of it at your highest tax rate for that tax year. This means you could end up with a big tax bill. 

  • Take a bit at a time - You could take money (drawdown) from your pension pot a bit at a time over a number of years. With this option you will still be able to get to your savings but have more flexibility. You’ll need to make sure that your savings can keep giving you an income for as long as you need them to. This is often referred to as ‘Drawdown’. 

  • Buy a guaranteed income (annuity) - You could give all of your pension pot(s) to an annuity provider in exchange for a guaranteed regular income. Or you can take your 25% tax-free cash first, and then use the other 75% of your pot to buy a guaranteed income. This guaranteed income can be paid to you for as long as you live or for a number of years that you choose at the start.

  • A combination of these options – For example, you could use some of your pension pot to buy a fixed term annuity. This would give you a guaranteed income for a set number of years. You could then save or invest the rest of your money to make decisions on at a later date.

When choosing what to do with your pension savings, some decisions may be irreversible or contain levels of certainty or risk. We’d recommend you get expert help and financial advice.

Getting specialist retirement advice

Getting advice on your pension could see you significantly better off. By taking advice on your pension, you'll be able to:

  • Get the best option or combination of options for your needs. Speaking to an adviser will help you understand the choices available and find the right one for you.
  • Maximise your pension savings. If some of your pension savings remain invested, a pension specialist will be able to manage the investment to maximise its growth at a risk level you are comfortable with.

When reviewing the best options for you, your adviser will look at the most tax efficient way for you to take money from your pension. Paying less tax will mean you’re better off.

At LV= we’ve been specialising in providing trusted and regulated retirement advice for over 20 years. Our friendly advisers will get to know you and find out what you want your retirement to look like. They’ll help shape your options to help you meet your goals and enjoy a safe, secure retirement.

Learn more about how our pension advisers can help you plan for retirement and get your pensions ready for the retirement you want to enjoy. You can request a call back from one of our friendly advisers today.

Alternatively you can find an adviser by using

Data Source

*LV= surveyed 4,000 nationally representative UK adults via an online omnibus conducted by Opinium in June 2021.

View the July 2021 Edition of the LV= Wealth and Wellbeing report