Your pension options at retirement

3 minute read

With changes to pension freedom rules, there are more choices than ever to help you live the life you want in retirement. So, what are they?

Who's it for? All investors

The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.

What you’ll learn:

  • The options available to you at retirement
  • Where you can get free government advice from
  • Why you might consider a Self-invested Personal Pension (SIPP).

If you’re approaching retirement, it’s important to keep paying into your pension so you have as much as possible to fund the future you want. But it’s also time to start researching your options, and to think about how you’ll access your money when the time comes.

With any pension, your money will be locked away until you reach the age of 55, which is 10 years prior to when you can draw your State Pension (this will rise to 57 by 2028).

1. Leave your pension fund invested

Just because it’s an option, there’s no obligation to take any cash out or start drawing an income at retirement.

If you want to – and especially if you’re still working – you can continue paying into your pension and making the most of the generous tax benefits.

If you’re not working, you can still pay a total of £3,600 gross a year into a pension scheme and qualify to have tax relief added to contributions. This means that, with the present tax rate, you would make a net payment of £2,880 and have £720 added in tax relief.

2. Take it all out

If you’ve got big plans, like paying off your mortgage or investing in property, you could cash in your entire pension.

The first 25% will be tax-free, while the remaining 75% will be added to your other income sources in that year – and taxed accordingly. So if you’re withdrawing a significant amount or still earning at the same time, you could easily be pushed up a tax bracket.

Please note if you draw an income and want to continue paying into your pension, the amount you can contribute will be reduced.

3. Take a lump sum

Want to treat yourself to a dream holiday?

Normally, the first 25% lump sum you withdraw will be tax-free. You’ll need to do your research to decide what’s best to do with the remainder.

If you don’t need as much as 25% of your total fund, you could take out some cash tax-free – giving what’s left more time to potentially benefit from investment growth.

Alternatively, you could take out more than 25% as a lump sum, but you’ll need to pay tax on it.

4. Use your pension to provide you with an income

If you don’t need cash immediately, think about how you’ll use your pension to provide yourself with an income.

A traditional annuity gives you the security of knowing how much you’ll receive each year for the rest of your life, but it’s crucial to think carefully about the type you need and shop around for the best rates.

Alternatively, ‘flexi-access drawdown’ gives you greater control over your money because you can take an income as and when you need it, while leaving your pension invested so it has the possibility of growing. As with any investment, there’s always a risk you could get back less than you started with. And if you take too much out of your pension pot, there’s also the risk that you could run out of money before you die.

Need a little more guidance?

Remember everyone’s situation is different – from the amount you've saved, to your tax status, to what your ideal retirement looks like.

So working out what’s best for you will involve reading up on your different options, getting your paperwork together from your pension providers so you know what balances you have and where, and talking openly about your personal circumstances.

It’s always a good idea to speak to a financial adviser before making any big decisions. And if you’d like to chat through your options, the government offers free guidance called MoneyHelper to anyone 55 or over – which you can access face to face, by phone or online.

Wealth Management

Barclays Wealth Management offers a personal and proactive approach to managing your wealth. We take the time to get to know you and understand your ambitions, and create unique solutions for every stage of your life.

Find out more about Barclays Wealth Management

Ever considered a SIPP?

A Self-Invested Personal Pension (SIPP) is a type of personal pension that can offer you access to a wide choice of investments, giving you greater control over where your money is invested.

It’s a flexible way to help you achieve your retirement goals, as long as you’re confident making your own investment decisions.

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Remember, the value of investments can fall as well as rise and you could get back less than you invest. We don’t offer personal investment or pensions advice. If you’re not sure about investing, seek independent advice. Tax rules can change in future. Their effects on you will depend on your individual circumstances.


Self-Invested Personal Pension (SIPP)

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What is a SIPP?

If you’re looking for greater control over how your retirement savings are invested, and you have investment expertise and the necessary time then a self-invested personal pension (SIPP) could be worth considering.

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