Questions to ask yourself about retirement

1. How can I manage the tax on my pension benefits?

If your income is likely to be high enough that you’ll still pay tax in retirement, consider what will be the most tax-efficient way to take money out of your pension pot. For example, income drawdown offers the most flexibility to take tax-free cash up front and defer the taxable income element.

2. Do I want a guaranteed or a flexible retirement income?

Using your pension pot to buy an annuity contract can provide a guaranteed income for the rest of your life. Flexi-access drawdown can provide an income that can be adjusted over time but which can rise and fall and isn't guaranteed.

3. Do I want to keep my pension pot invested after retirement?

If you want to give your pension pot the potential to maintain or grow its value, moving it to flexi-access drawdown means it can be invested in a wide choice of investment funds.

If you choose to leave your pension pot in your workplace pension, it can also remain invested. But remember 75% of every payment you take out will be taxable.

And, don’t forget - the money you keep invested remains at risk from the markets’ ups and downs and isn’t guaranteed.

4. Do I want to pass on my pension on death?

An annuity will die with you unless you buy a joint annuity or one with a survivor’s income or guaranteed period built in. Income drawdown can generally provide more flexibility to pass on unused pension money to family and loved ones.

5. Should I mix and match different options?

You can blend different retirement options such as drawdown, annuities and taking tax-free cash. You can also change the mix as your needs change throughout retirement.

If you only have a modest pension pot, however, remember that product providers may have minimum investment requirements.

Getting advice

The choices you make for your workplace pension can affect the level of income you receive for the rest of your life. Professional financial advice and guidance is highly recommended to help you decide the best course of action.

If you don't have an adviser already, visit unbiased.co.uk(Opens new window) to find a regulated adviser close to you.

If you’re 50 or over, you’re also entitled to free, impartial guidance from the government service Pension Wise. You can receive Pension Wise guidance online, over the phone or face to face. Visit pensionwise.gov.uk or call 0800 138 3944 to book a free appointment.