Accessing your pension
Important information: What you do with your pension is an important decision that you might not be able to change. You should check you're making the right decision for your circumstances and that you understand all your options and their risks. The information on our website isn’t personal advice, but we can offer financial advice if you'd like it.
In this video, we explain the key retirement options available such as annuities, drawdown and UFPLS.
What are my retirement options?
The earliest you can access your pension is usually 55 (rising to 57 from 2028).
It's up to you when you take it. And if you don't need the money yet, you can leave it for future. Below we compare the main retirement options for taking money from your pension.
The government's free and impartial Pension Wise service can help those aged 50 or over understand what type of pension they have, how to access their pension savings and the potential tax implications of each option.
Tax rules can change, and the benefits will depend on your own circumstances.
Compare your retirement options
There are three main ways you can access your pension: by getting an annuity, moving money into drawdown and taking lump sums. You can also mix and match your retirement options, which could help you find the right balance of security and flexibility.
Overview
Tax
Benefits
Risks
Annuities
Swap money in your pension for a guaranteed income for the rest of your life.
Tax
You can usually take up to 25% tax-free cash at the start. Your income is taxable.
Benefits
- Your income is guaranteed for life. This is true no matter how long you live or what the stock markets are doing.
- You can choose options so your income increases. This means your buying power could keep up with inflation.
- Your income could continue after you die if you’ve chosen certain options when you get quotes and apply.
Risks
- You can’t change your options if your circumstances change.
- You can’t cash in your annuity.
- Annuity rates might rise in the future, but you won’t benefit from this if your annuity is already being paid.
Tax
You can usually take up to 25% tax-free cash at the start. Any income you withdraw is taxable.
Benefits
- Withdraw what you want, when you want. So you keep your options open if your circumstances change.
- Potentially beat inflation with returns from your investments. You could maintain your buying power as prices rise.
- Pass on your money – when you die this can normally be paid as a lump sum or as income.
Risks
- You could run out of money if you withdraw too much too soon, your investments don’t perform as you’d hoped or you live longer than expected.
- Income isn’t secure, it could fall or even stop completely.
- It’s possible you’ll get back less than you originally invested, as all investments can fall as well as rise in value.
Lump Sums
Keep your pension invested. Take the lump sums you want, when you want.
Tax
Usually 25% of each withdrawal is tax free, and the rest is taxable.
Benefits
- Withdraw what you want, when you want. So you keep your options open if your circumstances change.
- Potentially beat inflation with returns from your investments. You could maintain your buying power as prices rise.
- Pass on your money – when you die this can normally be paid as a lump sum or as income.
Risks
- You could run out of money if you withdraw too much too soon, your investments don’t perform as you’d hoped or you live longer than expected.
- Income isn’t secure, it could fall or even stop completely.
- It’s possible you’ll get back less than you originally invested, as all investments can fall as well as rise in value.
Should I combine my pensions?
Consolidating your pensions is a good way to take control of your pension savings - particularly as you approach retirement.
It will make it easier to see exactly how your investments are performing, and if you're on track to reach your retirement goals. But remember transferring isn’t right for everybody. If you’re thinking about combining your pensions, check you won't lose valuable guarantees or benefits or have to pay excessive exit fees.
Why use HL's retirement service?
- Access to all the main pension income options
You have the freedom to choose a flexible or secure income at retirement. You can pick drawdown, take lump sum payments, opt to buy an annuity or even mix and match your options. - Get the best annuity rates
You can get live annuity quotes from all UK annuity providers on the open market within minutes. Our annuity calculator allows you to shop around to get the best deal. - Manage your account with ease
You can check your pension income and investments whenever you like, online and with the award-winning HL app.
Guides & tools
How well do you know your retirement options?
If you’re thinking of taking money out of your pension, do you understand all your options?
Take this short quiz to test your knowledge and help you to understand the basics.
Question 1
You have to be at least 65 to access your pension. True or False?
You can normally access your personal pensions from as early as 55 (rising to 57 from 2028). You might be able to access your pension sooner if you have a protected retirement age or you’re unable to carry out your occupation due to ill health. Use our pension calculator to see how much income you’re on track to receive and how much could be tax free.
Question 2
There are three main ways to take money from your personal pension. True or false?
You can:
- Exchange your pension for a secure lifetime income (an annuity)
- Keep your pension invested, drawing an income as and when you need to (via drawdown or as lump sums)
- Withdraw your entire pension in one go
At the end of the quiz download our options at retirement guide to find out more about their risks and benefits.
Question 3
You have to pay for professional advice before you can access your personal pension. True or false?
If you’re happy to make your own investment decisions, there’s no legal requirement to take personal advice. But what you do with your pension is an important decision. We strongly recommend you understand your options and check that the option you choose is right for your circumstances. You should seek guidance or advice if you’re unsure. If you’d like to talk through the options, book a consultation with one of our specialists at the end of this quiz. If you think you might want personal advice, they can put you in touch with an HL adviser in your area.
Question 4
You get poor annuity rates if you have medical conditions. True or false?
Having health and lifestyle conditions will often mean you qualify for more income. Even if you have minor conditions or are fit and healthy, it’s still worth confirming basic details like your height, weight and alcohol intake. To see how much annuity income you could get, why not compare quotes now?
Question 5
All pension providers offer all the main retirement options. True or false?
You might find that your current pension provider doesn’t offer all retirement options available – it’s not a legal requirement. You may have to transfer your pension elsewhere to access the options you want – you could consider our HL Self-Invested Personal Pension (SIPP). Before transferring, check you won’t lose any valuable guarantees or need to pay high exit fees. If you’d like to find out more about your options or our services, book a consultation with a retirement expert at the end of this quiz.
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