Choose how to take your pension savings
Understand the options available when you want to take your pension savings.
5 key things to think about
1. Decide when you want to take your savings
Most people start taking their workplace pension money in their mid-60s.
You can start to take it from age 55 (rising to 57 in 2028), or leave it for longer, giving it a chance to grow. You may also be able to take your pension earlier due to ill health.
Learn how your selected retirement age affects your pension and investments.
2. Check how much money you’ve got
Some options are only available if you have a certain amount saved. With People’s Pension, you’ll need more than £10,000 to choose some options.
Consider how much money you’ll need and how long it could last for. You can log in to your account or use the app to check your projected pension savings.
3. Decide how many payments you want
You may want to take all your money at once – or would a regular monthly income be better for you?
Some options give you flexibility and let you change how much you take. Others, like guaranteed income options (annuities), are fixed. Think about what matters most to you.
4. Check how much tax you could pay
The option you choose and the amount you take from your pension could impact the tax you pay.
Only 25% of your pension is tax free. The rest is taxed like income. Taking a large amount in one go could push you into a higher tax bracket.
5. Take your time and get support
Give yourself time to think and feel comfortable about your decision. Some options let you keep your remaining pension invested. This gives your money a chance to grow and potentially support you for longer.
If you want to leave money to your loved ones, options like a flexible income arrangement let you leave unused pension savings to your beneficiaries. Other options, like certain annuities, don’t.
Getting guidance or advice could also help.
Options to take money
We’ll guide you through the options so you can choose what works best for you.
Take all your pension savings at once
You can take your whole pension as a single lump sum, with the first 25% tax free. The rest is added to your taxable income for the year.
Taking all your pension in one tax year:
- could mean some of your money is taxed at a higher rate
- may also affect any means-tested benefits
- would close your account (if you take a lump sum less than £10,000) and mean you won’t have other pension options.
Consider whether taking all your money now could leave you with less money later on.
Take just your 25% tax-free lump sum
With this option you can take your tax-free lump sum first – either all at once or a bit at a time. The rest stays in your pension, where it could continue to grow.
For example, if you have £10,000, you could take £2,500 tax free.
You’ll need to have more than £10,000 saved with us to get you started with this option, or £2,000 if you’ve taken money from your pension before.
Take your pension savings as a regular monthly income
You’ll need to have more than £10,000 saved, or £2,000 if you’ve accessed your pension before. You must take at least £50 a month.
With this option:
- you’ve got control and flexibility over how long your pension should last and how much you take each time
- you can use some of your savings for a regular income, while keeping the rest invested
- spreading your payments could reduce the tax you pay on your withdrawals.
Take smaller amounts from your pension
You can take smaller lump sums when you need them. This option is sometimes known as a ‘partial uncrystallised funds pension lump sum’ (or UFPLS).
You’ll need more than £10,000, or £2,000 if you’ve taken money from your pension before, and must take at least £2,000 each time you take a withdrawal.
Get a guaranteed income (annuity)
After taking your 25% tax-free lump sum, you can use your remaining pension to buy an annuity. This provides you with a guaranteed income for either a set period or the rest of your life. Once you take out an annuity, you cannot switch options. We don’t offer annuities, but we can provide you with information to help you decide if this option is right for you.
Combine different options
You don’t have to choose just one option.
For example, you could take your tax-free lump sum now, then set up a regular income, and later buy a guaranteed income.
Providers offer different options, so it’s worth doing your research first.
You may also want to get some guidance or advice.
Guidance, advice and support
Real-life retirement scenarios
See how different pension choices work in real life.