Your retirement options

After years of saving, you’ve decided to retire. You’ll need to decide what to do with your pension pot. You can normally start taking money from your pension plan when you reach age 55. There are a number of options for you to choose from:

Some people like the comfort of knowing what they’re going to get in the future and choose an annuity. But if you have a larger pension pot – at least £50,000 – you could choose a flexible income instead.

A guaranteed income– an annuity gives you a guaranteed income that will be paid to you for the rest of your life.

A flexible income – Income Drawdown keeps your pension pot invested and lets you withdraw money directly from it.

As with any investment the value of your fund can go up or down and may be worth less than what was paid in.

If you need help deciding contact your financial adviser or call us on 0845 279 8810 and we’ll explain your options. Call charges will vary.

You may also compare these options side by side

You can normally take up to 25% of your pension pot as a tax-free lump sum. How much do you need?

If you have pension plans invested with different companies, you can combine them with us or another provider so that you get just one source of income in retirement.

You should always seek financial advice before deciding to transfer any pension plans. Some providers may charge you for transferring your plans elsewhere and it’s also worth checking if you're likely to lose any valuable benefits by transferring your plans. There is no guarantee that what you will get with the new plan will be higher.

Laws and tax rules may change in the future. The information here is based on our understanding in November 2012. Your personal circumstances also have an impact on tax treatment.

With a pension pot, you can normally choose to take up to 25% of your pension fund as a tax-free lump sum.

• If you’re buying an annuity – you need to take all your tax-free lump sum before you buy an annuity
• If you’re taking out Income Drawdown  – you can take your tax-free lump sum in smaller portions or you can take it all in one go

Learn more about taking a tax-free lump sum

Decide on whether you want a tax-free lump sum. The amount of money you have in your pension pot can then be used to buy an annuity – this will give you a guaranteed income for the rest of your life. Annuities come with lots of options – you can tailor yours to include benefits such as a pension for your spouse or partner if you die.

The income you take from your pot will be taxed under the Pay As You Earn (PAYE) system. You can find out more on the HM Revenue & Customs website.

Buying an annuity is a long-term decision − once it’s set up you can't cash it in or make any changes.

• Guaranteed income – with an annuity you’ll receive a set income for life. The amount you receive depends on a number of things including annuity rates and your age.
• Flexibility – you can choose options to make your annuity really work for you. These include how often you want it to be paid.
• Help to combat inflation – your annuity can increase every year by a fixed rate or increase or decrease each year in line with changes to the Retail Prices Index (RPI). These types of annuity will start at a lower rate than a normal annuity.
• Impaired Life annuity – if you suffer from a serious illness you may be able to get an annuity on specially enhanced terms.
• Affordability – you can buy an annuity with a relatively modest pension pot.

How annuity options work - shaping your annuity video

Once you buy an annuity, you can't usually change it – so you need to make sure you’re comfortable with your choices. For example, buying an annuity early can leave you with a small income for the rest of your life – it’s not right for everyone.

And when you die, the annuity will stop – unless you’ve chosen an option like a pension for your spouse. You also need to take your tax-free lump sum at the same time you buy your annuity.

Your annuity income can increase each year by a fixed rate. Or you can choose an annuity linked to RPI, where it can increase and decrease in line with RPI changes. Both these options will however, provide less initial income than a level annuity, but do consider what might happen as you get older.

If you feel that an annuity is the right option for you, you can choose who to buy it from. You can either buy a:

• Standard Life annuity – we’ll send you a retirement quote as you near your selected retirement age, and personalise it to suit any options you’ve selected
• Open Market Option Annuity – you can choose to shop around and buy your annuity from any authorised provider. It may improve the income you receive

Both these options are available to Standard Life customers and customers of other companies.

If you have pension plans invested with different companies, you can combine them with us or another provider so that you get just one source of income in retirement.
You should always seek financial advice before deciding to transfer any pension plans. Some providers may charge you for transferring your plans elsewhere and it’s also worth checking if you’re likely to lose any valuable benefits by transferring your plans. The amount transferred in may be worth less once transferred.

Speak to your financial adviser or us on 0845 279 8810 and we’ll explain your options to you. Call charges will vary.

Compare annuities and income drawdown

Learn more about annuities and income drawdown

Decide on whether you want a tax-free lump sum. The amount of money in your pension pot can then be used to take Capped Drawdown. Your pension pot then stays invested and you simply make withdrawals directly from it whenever you want. You can also choose to increase or decrease what you take out - making it a flexible way to take your pension income. There are limitations - please refer to section below. The amount you drawdown is dependent on the value of your pension pot and you should check you can sustain the level of income you take.

This section applies to Capped Drawdown only. Some of the benefits and limitations do not apply if in Flexible Drawdown.  Flexible Drawdown differs in that you have to have an alternative source of guaranteed income. For more information speak to your financial adviser or contact us on 0845 272 8810. Call charges will vary.

• Flexible income – take a flexible income directly from your invested funds, within limits set by HM Revenue & Customs (HMRC). HMRC tell us how much tax to deduct. We will deduct the tax before we pay you
• Continue to pay in – you can still pay into your invested pension pot
• Keep your options open – you can convert your drawdown income into an annuity at any time
• Investment potential – you can use some or all of your pension pot. Your funds are re-invested so they have the chance to grow
• When you die – your invested fund can provide an on-going income for your dependants or a lump sum payment to a number of beneficiaries, or a mixture of both. The income will be taxed under Pay As You Earn (PAYE) using the dependant's tax code. HMRC tell us how much tax to deduct. We will deduct the tax before we pay your dependant. Or your pension pot will be available as a lump sum, but subject to a 55% tax charge.

The income you take from your pot will be taxed under the Pay As You Earn (PAYE) system. You can find out more on the HM Revenue & Customs website.

Because your money’s still invested, there’s always the risk the value of your investment could go down as well as up. This means you might get less income than you would with an annuity. It’s always worthwhile checking you have enough money invested.

You also generally need at least £50,000 in your pension pot to take income drawdown. Your income is limited to the funds available, so you should have regular reviews to ensure you have enough to give you the income you want.

Capped drawdown can only be set up using a Standard Life Self Invested Personal Pension (SIPP).

Capped Drawdown isn’t for everyone - speak to an adviser if you think it’s the option for you.

Speak to your financial adviser or call us on 0845 279 8810 and we’ll explain your options to you. Call charges will vary.

Compare annuities and income drawdown

Learn more about annuities and Capped Drawdown

If you’ve got a few pension plans with different companies, it could make financial sense to combine them into a single plan. As well as being able to keep track of your investments at a glance, you may end up paying less in charges.

If you are buying an annuity:

• More control - buying one annuity makes it easier to manage.

If you are staying invested:

• More control – a single set of figures makes it easier to review performance. Their combined total will mean more accurate forecasts of your pension income too.
• More choice – you may be able to choose from more investment options.
• Fewer charges – instead of a charge per pension, one set of fees could save you money. You may also receive discounts on your plan.

You’ll also have one point of contact. And with Standard Life you’ll be able to manage your pension online, keep track of its progress and make changes whenever you want.

It depends on your circumstances. Make sure you know the answers to these questions.

• Will you have to pay an exit fee? Check if your plan has an exit fee and what the amount is.
• Could you lose a valuable benefit? You won't be able to transfer features like guarantees – you may have a guaranteed annuity rate as part of your existing pension plan.
• Do you have a final salary plan with a company? Generally the extra benefits and higher yields of these schemes mean that it makes sense to leave them where they are.
• Will you really save money on costs? Check the Key Features Documents for new and existing pensions to be sure.

Transferring pensions isn’t for everyone. Speak to your financial adviser or contact us on 0845 279 8810 before you decide. Call charges will vary.