What are my Retirement Income options?

Do you want flexibility on how you access your money? Pension drawdown is a flexible way to take income from your pension pot when you turn 55 (57 from 6 April 2028). You can usually take out up to 25% of your pension savings tax free, and the rest will stay invested. You can take your money whenever you like, as a regular monthly income or cash lump sums in more than one go, but you’ll pay income tax on anything over your 25% tax-free amount.

Pros

• Taking your money: You can set up an income that you can stop, start or change at any time.
• Any money that's left stays invested: It has the potential to grow in a tax efficient way.
• Investment choice: You're in control and can choose where you invest your remaining money. You can usually pick your own funds, or choose a ready-made option to suit your needs.
• Pass on what's left in your pension plan: You can leave what’s left in your pension plan to your loved ones when you die, normally free from inheritance tax. From April 2027, the government have announced their intention to include unused pension savings when calculating the value of estates and could be subject to inheritance tax. The full details of how this will work are still to be confirmed.
• Change your mind later: You can convert to a Guaranteed Income for Life (annuity) at any point.

Cons

• You need to make sure your money lasts: How much money you take, when you take it and how your investments perform will affect how long your pension pot will last. You need to manage your withdrawals and make sure your pot lasts as long as you need it to.
• You need to consider your investments: You need to manage and make sure your investments remain right for you. Remember the value can go down as well as up and isn't guaranteed.
• Your tax position could be affected: Any money you take may be subject to income tax, so you’ll need to consider if this will change your tax position.
• Your state benefits could be affected: You should check this isn’t going to be a problem before going ahead. For more information visit the gov.uk website
• The amount that can be paid into pension plans could be reduced: Taking more than your tax-free lump usually lowers the maximum amount you or an employer can pay into any of your defined contribution pension plans in a tax year without attracting a tax charge. There is more information about this on the MoneyHelper website.

Shopping around

As the amount you take is set by you, the things to consider are the investments available and the charges you have to pay.

You can take a flexible income and purchase an annuity either at the start of your Retirement Only Master Trust journey or at a later point in time.

An annuity will provide you with a guaranteed regular income for the rest of your life so you'll have the peace of mind knowing that it won't run out before you die. The amount of income you’ll get depends on a few things such as:

• Your age
• The amount of money in your pension pot
• Your health and lifestyle
• Any options you choose as part of your annuity (such as an income that increases over time or provision of benefits for your spouse or dependants after your death).

Keep in mind that the guaranteed income you get will be subject to income tax and may affect your state benefits. An annuity is a separate policy from the Master Trust. If you choose an annuity your money will no longer be invested, as part of the Master Trust - Retirement Section.

Shopping around

Other providers may offer a higher level of retirement income, and access to options more suited to your individual circumstances.

You don't have to take your money when you transfer. You could leave it invested and take it later.

Shopping around

Consider the investments available and the charges you have to pay. You may also want to look at the retirement options that will be available when you want to access your money.