You can take both a tax-free lump sum and an income from your pension.

A tax-free lump-sum

You can usually take up to 25% of the value of your pension as a tax-free lump sum, called a pension commencement lump sum.

Income from your pension

You can use the full value of your pension, or the remainder if you take a tax-free lump sum, to either:

* provide you with an income – called a drawdown pension
purchase an annuity from an insurance company to provide you with a guaranteed income for the rest of your life

With a drawdown pension your money stays invested, and you make withdrawals from it when you need to. There is no minimum, or maximum amount you have to withdraw. You pay income tax on the amount you withdraw, based on the amount of your income together with your other taxable income.

Instead of receiving a drawdown, you can use the remainder of your pension to purchase an annuity from an insurance company. While annuities vary, they generally provide you with a guaranteed income for the rest of your life. The amount of income payable to you will depend on the annuity rate offered by your chosen provider.
Was this article helpful?
Cancel
Thank you!