There are now six retirement options that you should consider.
• Option 1- Leave your pension pot untouched for now and take the money later.
It’s up to you when you take your money; you might have reached the normal retirement date under the scheme or got a pack from your pension provider but that doesn’t mean you have to take the money now. If you do not take your money, you should check the investments and charges under the contract.
• Option 2- Get a guaranteed income (annuity)
You can use your whole or part of your pension pot to buy an annuity. It typically gives you a regular and guaranteed income. There are different types of annuity available.
• Option 3- Get an adjustable income (drawdown)
You can usually take up to 25% as a tax-free cash sum. The rest of your pot is invested to give you a regular (taxable) income in retirement.
• Option 4- Take cash in chunks (drawdown) How much and when you take your money is up to you. 25%, of every chunk, you take is usually tax-free, the rest is taxable.
• Option 5- Cash in your whole pot in one go
You can do this but there are certain things you need to think about. You have to consider how much tax you pay on the amount you take out and you have to think about what you’ll live on in retirement. You could end up loosing over 40% of your pension pot in tax.
• Option 6- Mix your options
You don’t have to choose one option you can mix them over time or over your total pot.