Do you understand your retirement options?

This content was reviewed and approved by Tamlin Russell.

What are my pension options at retirement?

As you approach retirement age, you'll need to consider your pension options and how best to turn your savings into a reliable income. 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 your pension 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 your pension as a lump sum - 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 it bit by bit - You could take money from your pension pot a bit at a time over a number of years, this is referred to as ‘Pension Drawdown’. 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. Try our pension drawdown calculator to see what your income could look like by taking it this way.

• 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, and make personal budgeting easier. Try our Annuity Calculator to help predict your monthly income.

• Combine your pension options. For example, you could use some of your pension pot to buy a fixed term annuity which usually lasts between 3 and 25 years and would give you a guaranteed income for that period of time. You could then save or invest the rest of your money to make decisions at a later date. Our Fixed Term Annuity Calculator provides up-to-date results based on current annuity rates.

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.

How to compare your retirement options

Before deciding what to do with your pension, it can help to compare your options.

Your choice may depend on:

• How much income you need.
• Whether you’re still working.
• Your State Pension age.
• Your other savings and investments.
• Whether you have debts or a mortgage.
• Your health and life expectancy.
• How comfortable you are with investment risk.
• Whether you want to leave money to family.
• How much tax you may need to pay.

What should you think about before accessing your pension?

You can usually access a defined contribution pension from age 55, rising to 57 from 2028, unless you have a protected pension age or specific scheme rules.

However, being able to access your pension doesn’t always mean you should.

Before making a decision, think about:

• Tax: Taking too much in one tax year could increase the tax you pay.
• Longevity: Your pension may need to support you for 20, 30 or even 40 years.
• Inflation: The cost of living can rise over time, reducing the buying power of your income.
• Investment risk: If your pension stays invested, its value can go down as well as up.
• Guaranteed income: You may want some income you can rely on, especially for essential spending.
• Flexibility: Your income needs may change as you move through retirement.
• Death benefits: Different pension options may affect what happens to your money when you die.

It’s also worth checking whether accessing your pension could trigger the Money Purchase Annual Allowance. This can reduce how much you and your employer can contribute to defined contribution pensions while still receiving tax relief.

When will I receive my State Pension?

The earliest age at which you can begin receiving your State Pension payments is based on your date of birth:

The State Pension age is regularly reviewed, so this may change in the future. You can check your own State Pension age and forecast through GOV.UK.

Your State Pension may form an important part of your retirement income, but it may not be enough to cover everything you want from later life. That’s why it’s important to understand how it could work alongside your workplace pensions, personal pensions, savings and other assets.

Note: The State Pension is regularly reviewed, so some of this data is subject to change.

Should you use savings before your pension?

Some people use savings first and leave their pension invested for longer. Others may start taking pension income while keeping savings available for emergencies.

There isn’t one right answer. The best approach depends on your tax position, investment risk, income needs and whether you want to keep money accessible.

For example, using cash savings could help you delay taking taxable pension income. However, keeping too much in cash may mean your money doesn’t keep pace with inflation.

A financial adviser can help you understand the most tax-efficient way to use your pension, savings and other income sources together.

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.

• Understand the tax impact: Your adviser can look at the most tax-efficient way to take money from your pension and other savings.

• Plan your income properly: Advice can help you work out how much income you may need now, and how that could change later in retirement.

• Balance certainty and flexibility: You may want a guaranteed income for essential costs, while keeping some money flexible for later.

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 25 years. Our expert 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. Browse our extensive collection of pensions and retirement guides, or request a call back from one of our friendly advisers today.

Alternatively you can find an adviser by using unbiased.co.uk.

FAQs on retirement options

What are the three types of pension?

In the UK, there are three main types of pension, each offering tax benefits and helping you to save for retirement. 

The State Pension is paid for by the government based on National Insurance contributions paid throughout your working life. Workplace Pensions are set up by your employer and include contributions from you, your employer and the government (via tax relief) – you can have multiple workplace pensions, or choose to consolidate into a single pension. 

Finally, the Personal Pension is commonly set up by the self-employed or those wanting to boost their savings separately.

What is the 4% rule for pensions?

The 4% rule (also known as the ‘safe withdrawal rate’) is a common guideline for withdrawing a maximum percentage of money from a pension that ensures your savings last for at least 30 years. Retired financial advisor William Bengen determined that if a person took less than 4.2% of their pension in their first year of retirement, and then continued (adjusting the amount for inflation), there is a 90% chance that their savings would last for 30 years. 

It's a general rule and may not suit everyone, especially in today’s economic climate so seek independent financial advice before making any decisions on your retirement.

How many pensions can I have?

There is no limit to the number of pensions a person can hold in the UK, and many savers collect multiple workplace pensions from changing jobs, as well as personal pensions such as SIPP or stakeholder pensions. 

Consolidation, where multiple pensions are combined into a single pension, is popular due to its simplicity, however it’s worth weighing up how it affects the fees you pay. You also want to consider how it could impact any benefits (such as final salary scheme perks) and protected tax-free amounts. 

Can I retire at 60 with £300k?

It’s possible, but requires careful planning to make sure it lasts. It depends completely on your expected lifestyle, spending and other sources of income, and assumes no outstanding debts or significant unexpected costs. 

You won’t receive your State Pension until at least 66-67, so you will need to rely on savings, investments or other sources of income until then. Inflation and market performance can impact your pension pot, even if you withdraw cautiously so it’s worth seeking independent financial advice from an expert.

Is pension drawdown better than an annuity?

Neither option is automatically better. Pension drawdown gives you more flexibility and keeps your money invested, but your pension can fall in value and could run out.

An annuity gives you a guaranteed income, which can make budgeting easier, but it may be less flexible once set up. Some people choose one option, while others combine both.

Can I take 25% of my pension tax-free?

In many cases, you can usually take up to 25% of your defined contribution pension as tax-free cash, subject to any limits that apply.

You don’t always have to take it all at once. Depending on your pension provider and the option you choose, you may be able to take tax-free cash in stages.

Do I need financial advice before choosing my retirement options?

You don’t always have to get financial advice, but it can be very helpful. Some pension decisions are complex, and some may be difficult or impossible to reverse.

Advice can help you understand tax, investment risk, income needs, annuities, drawdown and how to combine different retirement options in a way that suits your plans.

Report data source information

*LV= surveyed 4,000 nationally representative UK adults via an online omnibus conducted by Opinium in September 2025. 
**LV= surveyed 4,000 nationally representative UK adults via an online omnibus conducted by Opinium in May 2026.