How can I receive an income in retirement?
As you reach retirement age it is important to understand the options available to you before you withdraw from your pension.
Receiving an income in retirement
You can use some or all of your pension fund to buy an annuity (a guaranteed lifetime or fixed term income). Alternatively, you can leave your pension fund invested and make regular withdrawals and/or take ad hoc lump sums. You can encash your full pension fund taking 25% of the fund tax-free and the remainder of the fund will be added to your income in the relevant tax year. All income withdrawn from a pension will be subject to Income Tax.
There is no maximum age by which you have to draw on your pension funds (subject to the terms of your pension plan) and you can choose not to draw on them at all should you not need the money when you retire.
What happens when I die?
You can nominate a beneficiary(ies) of your choice to receive the value of your pension fund after your death. You should ensure that your pension provider has been informed of your wishes.
If you die before age 75, any funds held in a pension can be inherited without a charge to tax. If you die after age 75 the funds inherited will be subject to an income tax charge based on the personal circumstances of the beneficiary(ies).
Tax is only paid on funds withdrawn from the pension, either in cash or as an income. It is possible to leave pension funds invested and pass them down through the generations in this way.Read more in our Pension fact sheet