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Limiting the value of payouts from pension schemes

The lifetime allowance is a limit on the value of payouts from your pension schemes – whether lump sums or retirement income – that can be made without triggering an extra tax charge.

A high-risk and non-tax-efficient way to fund your retirement income

Under new rules introduced in April 2015, you can now take the whole of your pension pot as cash in one go if you wish. However, if you do this, you could end up with a large tax bill and run out of money in retirement.

Consider the tax implications and the risk that your money could run out

Under new flexible rules introduced in April 2015, you can now use your pension pot to take out cash as and when you need it. However, there are tax implications and a risk that your money could run out.

Using your pension pot for a flexible retirement income

With flexi-access drawdown, when you come to take your pension, you reinvest your pot into funds designed to provide you with a regular retirement income. This income may vary depending on the fund’s performance and it isn’t guaranteed for life.

Values dependent on how well the underlying investments perform

Investment-linked annuities also pay you an income for life, but the amount you get fluctuates depending on how well the underlying investments perform. If the investments do well, they offer the chance of a higher income. But you have to be comfortable with the risk that your income could fall if the investments don’t do as well as expected.

Guaranteeing a regular retirement income for life

A lifetime annuity is a type of retirement income product that you buy with some or all of your pension pot. It guarantees a regular retirement income for life. Lifetime annuity options and features vary – what is suitable for you will depend on your personal circumstances, your life expectancy and your attitude to risk.

Regular retirement income for life or for a set period
An annuity is a type of retirement income product that you buy with some or all of your pension pot. It pays a regular retirement income either for life or for a set period.

You now have more choice and flexibility than ever before

Following changes introduced in April 2015, you now have more choice and flexibility than ever before over how and when you can take money from your pension pot. It’s important to take your time to understand your options and seek professional financial advice, as what you decide now will affect your retirement income for the rest of your life.

Building funds for your retirement

If you’re self-employed, saving into a pension can be a more difficult habit to develop than it is for people in employment. There are no employer contributions, and irregular income patterns can make regular saving difficult. But preparing for retirement is crucial for you too.

Low-cost option through your workplace

The National Employment Savings Trust (NEST) is a low-cost pension you may be able to join through your workplace or if you are self-employed. Once a member, you can carry on saving this way even if you change jobs or stop working.