How you can take your pension money

Your pension pot doesn’t automatically turn into a regular income or get sent to you as a lump sum.
You need to tell us how you want to take your money – and there’s a few different ways to choose from.

How to take money from your pension

Warning! Your pension pots are meant to provide an income for your retirement. It may be tempting to cash them in for other things, but you may be left only with the State Pension to live on and any other savings you have.

If you haven’t already received any guidance or advice from a financial adviser who specialises in retirement planning, we strongly recommend that you contact Pension Wise for free, impartial guidance about your options.

When you’ve made your decision about accessing your money with The People’s Pension, complete the claim form in your Online Account. Or alternatively, fill in and return the printed form we send you six weeks before your selected retirement date.

Please note, with The People’s Pension, there is an annual management charge made up of 3 elements – an annual charge of £2.50, a management charge of 0.5% of the value of your pension pot each year and a potential rebate on the management charge. To help you save more, typically this rebate is between 0.1% on savings over £3,000 and 0.3% on savings over £50,000. If you take out your money you may not receive this rebate. Find out more about how the rebate works when you take money out of your pension pot.

Your retirement options at a glance

Not all of these options are available from all pension providers. But if yours doesn’t offer the option you’re looking for, you can move your money to a pension company that does.

And you don’t have to choose just one way. You can mix your options if you want.

It’s a big decision. And if you need some help understanding and choosing between your options, you’ll need to know about your guidance and advice options too.

1. Keep it where it is

If you don’t need your pension pot right now, you can leave it invested.

This gives you more time to save and for your pension pot to grow. But, as with all investments, there’s a risk that the value can go down as well as up.

You can also defer taking your State Pension and then be eligible to claim more in the future.

More about deferring your State Pension

2. Take it in one go

No matter how much you have in your pension pot, you can take all of it as one lump sum if you want to.

But you’ll be taxed on 75% of it like you’re taxed on your income – so by taking it all in the same tax year, you could end up with a big tax bill.

3. Take it a bit at a time

If you’ve got over £10,000 in your pension pot with us, you could take it a bit at a time.

There’s two different ways of doing this with The People’s Pension, depending on when you want to take your 25% tax-free cash.

4. Buy a guaranteed income (‘annuity’)

We don’t offer a guaranteed income or ‘annuity’ product. But if you want, you can transfer your money out to an annuity provider to get a guaranteed income.

There’s different types of guaranteed income and the amount you’re offered will depend on the options you choose.

Choosing how to take your money

There’s lots of different factors that could affect your decision about how to take your pension savings out of your pot with The People’s Pension…

Combining your pension savings first

If you’ve got more than one pension – you might want to think about putting them all in one place so that they’re easier to manage.

The amount you have in your pension pot affects which options you can take your money through. So by combining your pension savings into one, you could change the options available to you.

It’s also important to compare the charges, features and services between the pension you want to transfer out of and the pension you want to transfer into – to make sure it’s the best option for you.

Find out what else you should consider before transferring

Tax considerations when taking money from your pension

It’s important to understand the tax implications of taking your pension savings – the amount of tax you’ll have to pay can be a major deciding factor when you’re choosing how to take money from your pension pot.

You’ll also need to watch out for emergency tax when taking money from your pension.

Learn about pension tax

Continuing to save into a pension after you start taking your money

You can start to take money out of your pension savings once you reach 55, even if you’re still working.

If you’re still going to be employed, it makes sense to keep saving into your workplace pension too – so you don’t miss out on the contributions that your employer will pay in alongside your own.

Or even if you’re planning to stop working, you can still continue paying into your pension savings as well as taking money out.

Considerations if you’re going to continue saving

If you’re going to continue saving, you need to think about this when you’re deciding how to take money out of your pension pot.

Because the way you choose to take your money out will affect how much you can continue saving and get tax relief on. Please note that you won’t be able to receive tax relief on your pension contributions after age 75.

If you take money from your pension in certain ways, it can reduce the amount you can pay into a pension and receive tax relief on in future. This is called your money purchase annual allowance.

Find out more about the MPAA

Mixing your pension options

You don’t have to choose one option – you can use parts of your pension pot for different options and take them at different times.

But not all providers will allow you to do this. You may need to transfer your pot to another provider if you want to take more than one option.

If you have more than one pot, you can use different options for each pot.

How does mixing your options work?

Different providers have different rules about taking your pension pot through more than one option. So it might be worth shopping around to get the best deal for you.

With The People’s Pension, it depends on which options you want to mix…

Will I still have other options available to me if I….

keep my pension pot where it is? Yes  You can keep your pension pot with us for as long as you like.
And when you do decide you want to access your pension pot later down the line, you can choose to take it through any of the retirement options available from The People’s Pension, at any point you choose (after you’ve turned 55).
take my pension pot all in one go?  No  If you take all of your pension pot in one go, you won’t be able to then choose any other options because you won’t have any money left in your pension pot to take.
And no matter how much you had in your pension pot to begin with (whether it’s more or less than £10,000) – your account with us will be closed once you’ve taken it all.
take my pension pot a bit at a time – taking my tax-free cash gradually? Yes  If you take part of your pot a bit at a time, taking your tax-free cash gradually, you can use the rest of your pot to take any other retirement option available from The People’s Pension.
Or you can continue to take it a bit at a time, taking your tax-free cash gradually. Normally you’d need to have more than £10,000 in your pension pot to do this – but if you’ve already taken one lump sum in this way, you may be able to do it again even if you have less than £10,000 in your pot.
take it a bit at a time – taking my tax-free cash up front? Yes  If you choose to take your pot a bit at a time, taking your tax-free cash up front, you have to take all of your tax-free cash (up to 25% of your pot), and move all of the rest of your pot into a flexi-access drawdown account.
But, if you change your mind later down the line, you could use what’s left in your flexi-access drawdown account to buy a guaranteed income for example.
And if you continue saving with The People’s Pension, you’ll start building up your pot with us. So you can claim your pot through any of the retirement options available from The People’s Pension – once you’ve built it up to a set minimum amount again. (For example, you need at least £2,000 in your pot to move it over to an existing flexi-access drawdown account.)
buy a guaranteed income (‘annuity’)? No  If you want to transfer to another provider to buy a guaranteed income, or if you transfer to another provider to take any retirement option – you’ll have to transfer your whole pot.Your account with us will then be closed, so it will depend on your new provider’s rules as to which options are available to you.
But generally, you can’t normally cash in or change your guaranteed income once you’ve made the agreement.

Retirement scenarios

Deciding how to take your pension savings is a personal decision – we can’t tell you what’s right for you personally. But you can get an idea of how different people take their savings in different ways, by reading our quick case studies…

Meet Rob…

Rob works full-time and plans to stop work completely at 65

As the State Pension age has started to change from age 65 to 66, Rob will need to wait until he reaches his State Pension age before he is able to claim his State Pension.

He has three pension pots he has saved up with three different employers.

He plans to merge two of the larger pots together to create a fund that will provide him with a regular income. The smaller pot he wants to cash in to buy a new car.

Meet Rishi…

Rishi plans to retire next year at 58 

He’s saved into his pension since he was 20 and has built up a reasonable pension pot.

He’s recently been unwell so wants to spend more time with his family. He plans to take a lump sum from his pension for a family holiday then take a regular income.

His ill health will help him secure a good level of guaranteed income from an annuity.

Meet Nicola…

Nicola enjoys her job but wants to go part-time from the age of 60 and retire at 65 

She plans to take a small lump sum from her pension to pay off her credit card and then another lump sum and a regular income when she stops working.

In the meantime, she continues to make payments into her pension pot.

Making an informed decision

Retirement planning = big decisions

So it might be a good idea to get guidance and advice before taking money from your pension.

And if you’re considering taking your pension money soon, you’ll want to understand all your options in more detail…