One option is to use your pension to buy an annuity which provides a guaranteed income. You’ll normally receive up to 25% of your pension as a tax-free cash payment, and the rest will be exchanged for a regular secure income. This is taxable and can’t normally be changed once set up, but will be paid for the rest of your life. How much income you’ll receive will depend on different factors, like your age, pension value, the rates available at the time and features you choose. It’s very important to shop around for the best rate and confirm health and lifestyle details as this could mean you get more income.
Another option is to move your pension into
drawdown. You’ll still normally receive up to 25% as a tax-free cash payment, and the rest will be kept invested as you choose. You can then make withdrawals (which will be taxed as income) from the remaining funds, when you’re ready.
Or you could take
lump sum withdrawals, where 25% of each withdrawal will usually be paid tax free and the rest will be taxed as income. You could even withdraw your whole pension as one lump sum if you want to.
With drawdown and lump sum options you need to be mindful of how long you need your pension to last, if you withdraw too much too quickly you could run out of money. Unlike an annuity, your income isn’t guaranteed and investments can fall in value as well as rise, so you may not get back what you originally invested. Taking large withdrawals could also affect your tax situation, so make sure you’ve planned for this before making any decisions. These risks mean drawdown won’t be right for everyone, and you'll need to regularly review where you're invested and how much income you're taking.