Money in a pension plan is usually invested so its value can fall as well as rise and you could get back 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.
Flexible income is a regular income that you can stop, start or change at any time. Any money that you don't take now, you can leave invested so it has the potential to grow.
You can usually take up to 25% of your pension pot tax free. Any money you take after this will be subject to tax.
Like all retirement options, there’s a lot to think about when taking a flexible income from your pension plan.
Read on as we break down all the key things to think about around flexible income.
Taking a flexible income might not be right for everyone. We've listed some of the main pros and cons to think about:
You can decide how much money to take and when to take it. You can set up a regular income that you can stop, start or change at any time.
Any money that you don't take now, you can leave invested so it has the potential to grow in a tax efficient way.
You’re in control and can choose where you invest your remaining money. You can usually pick your own funds, choose a ready-made option to suit your needs or you might want an adviser to do this for you.
You can leave what’s left in your pension plan to your loved ones when you die.
How much money you take, when you take it and how your investments perform will affect how long your pension pot lasts for. You need to manage your withdrawals and plan for the future to make sure your pension pot lasts as long as you want it to.
You need to keep managing your investments: Any money left in your pension plan is likely to be invested so you need to keep making sure your investments are right for you. You’ll also continue to pay investment charges.
Taking more than your tax-free cash usually lowers the payments you or an employer can make into your pension plan in a single tax year. They could drop from £40,000 a year to £4,000.
Your entitlement to means-tested state benefits could be affected if you take money from your pension plan. You should check this isn’t going to be a problem before going ahead. For more information visit the Money Advice Service website.
Not to worry, there are a few other options. Our ways to take your pension money guide explains how each of them works, breaks down the pros and cons, and has details on how to get started with your chosen option.
Here’s a quick comparison of how the features of each retirement option compare.
| Option | Will you get a guaranteed income for life? | Does your remaining money stay invested? | Can you access your money at any time? | Can you pass on what's left after you die? |
|---|---|---|---|---|
| Take a flexible income from your pension plan | No | Yes | Yes | Yes |
| Take one or more lump sums | No | Yes | Yes | Yes |
| Buy a guaranteed income for life(annuity) | Yes | No | No | No* |
| Leave your pension plan invested for now | No | Yes | Yes | Yes |
*Usually you can't pass on your guaranteed income for life, but you could add on options. For example, you could choose to pay a spouse's pension after you die. For more information, please visit our guaranteed income for life page.
If you feel that taking a flexible income is the right option for you, here are some options to get you started.
Login to your account to set up your flexible income. You’ll also find personalised tools and guides to help you explore your options further.
Login to your account to set up your flexible income. You’ll also find personalised tools and guides to help you explore your options further.
We’ll be happy to help - either call us or log in to send a secure message through your account mailbox.
We’ll be happy to help - either call us or log in to send a secure message through your account mailbox.
If you’re not sure, we’d encourage you to seek financial advice. There’s usually a cost for this.
If you’re not sure, we’d encourage you to seek financial advice. There’s usually a cost for this.
We recommend you seek appropriate guidance or advice before you make any decisions. You can get free impartial guidance over the phone or face to face with Pension Wise.
We recommend you seek appropriate guidance or advice before you make any decisions. You can get free impartial guidance over the phone or face to face with Pension Wise.