A pension is a long-term investment. Its value can go down as well as up and could be worth less than was paid in. Laws and tax rules may change in the future. Your own circumstances and where you live in the UK will also have an impact on tax treatment.
Retirement is when you can choose to stop working or reduce how much you work. It can be a time to enjoy life and relax, without any pressure from work. These days the line between stopping work and starting retirement has blurred. The State Pension age has risen, while the age you can choose to take money from many workplace and personal pensions has been lowered. Some people opt to reduce their hours before they stop work altogether.
It's important to think about how much money you'll need before you decide when to retire. Will you want a new car now and then? Will you want to dine out with friends? What about holidays and hobbies?
We can help you figure out what your costs might be on our calculator.
Not everyone can afford to stop work altogether, when they get older. Not everyone wants to. These days, you can work less and take money from your pension to top up your income. If you decide this is right for you, there are different ways can you take money from your pension.
It's important to think about how the money you take from your pension is taxed. The first 25% of your pension pot is tax-free so it won't affect your tax bill. Anything you take after this may be subject to tax.
Taking money from your pension can impact how much you can pay into your pension in the future. This is called the annual allowance and you can read our guide on how it works here.
Join our Retirement webinar to find out how to answer all the big questions, and make the most of your retirement.
You can start to take money from most pensions at the age of 55. You need to think about how much money you'll need to fund the lifestyle you want, either after stopping work completely or reducing your hours.
This will help you decide when you have enough money saved to retire.
The current State Pension age is 66 and it’s worth £179.60 a week for the 2021/2022 tax year. The amount you actually get will depend on your National Insurance record.
Read our guide on the State Pension.
These are pensions where the amount you get depends on how much has been paid into your pension and how the investments perform. If you want to find out more, read our Pension Basics guide.
All personal and most workplace pensions are ‘defined contribution’ plans. If you have one of these, you can usually start taking money from your pension after you reach age 55.
You don’t have to take your money at 55. You can still live off another source of income, like your job. You can keep paying into your pension until you have enough to retire.
If you have a defined contribution pension, your money is usually invested so it has the potential to grow but this is not guaranteed. The value can go down as well as up and you could get back less than you paid in. Usually, 25% of what you take out is tax-free. The rest may be subject to tax.
These are workplace pensions. If you have one of these, it will give you a guaranteed income based on factors such as the number of years you stayed with your employer. If you want to find out more, read our Pension Basics guide.
These types of pensions will start paying out based on their scheme rules. You need to get in touch with your employer or the scheme manager to find out when it will start paying you.
The way you can take your pension money depends on the type of pension you have.
You can choose to claim or you can defer it until later. It pays out every four weeks.
These usually pay out monthly. Talk to your employer or the scheme manager to get the correct details.
If you have enough in one of these plans, they can give you more freedom on how you can take your money.
You can choose how to take your pension money with this type of pension, but keep in mind that you may have to transfer your pension to another provider to get the option you want.
Here's a closer look at the options that might be available.
The first 25% is tax-free. The rest is liable to income tax.
The first 25% is tax-free. The rest is liable to income tax.
Use some or all of your pension pot to buy a guaranteed income for life (annuity). You can usually take 25% of it is an upfront tax-free lump sum.
If you have a large pension pot and you take out a lot of it as cash, you might have a large income tax bill for the year you take it.
You can take as much out as you need and leave the rest invested.
There is no investment risk involved in the option.
You need to manage your withdrawals and plan for the future so you can make sure that your money lasts as long as you want it to.
You’ll need to make investment decisions about the money you leave in your pension. Investing involves risk and your plan might fall in value.
However, once you have bought an annuity, you can’t go back on this choice.
You can read more about your options on our Ways to take your money guide.
If you don't have enough money in your pension, it can limit your options. Bringing your pensions together could increase how much you have in your plan and give you more options. But this isn’t the right choice for everyone.
Crunch some numbers and look at your options with our handy calculators. They're designed to make your future options come to life.
Use our pension calculator to see how much your pension could be worth when you retire. Are you saving enough for the future you want?
Use our pension calculator to see how much your pension could be worth when you retire. Are you saving enough for the future you want?
Our retirement tool can help you get an idea of how much the retirement you want might cost.
Our retirement tool can help you get an idea of how much the retirement you want might cost.