Drawing Your Pension Benefits

There are various ways of taking an income from your pension and the complexities surrounding the pros and cons of each method highlights the importance of seeking the advice of an Independent Financial Adviser (IFA).

The options include a lifetime annuity, phased retirement, an unsecured pension, or an alternatively secured pension.

Lifetime Annuity

A lifetime annuity converts your pension into an income for the rest of your life, however long you live. The amount of income you receive depends on many things, including:

• The amount in your pension fund after taking any tax-free cash (you must take any tax free lump sum before your 75th birthday)
• Your health and lifestyle
• Your age
• Your sex
• The type of annuity

Annuity rates do vary and one of the current problems is that they keep on dropping. This is partly due to poor investment returns forced on the providers as well as the increase in life expectancy. 

Income Drawdown or Unsecured Pension

If you decide you don't want to buy a lifetime annuity straight away and you are under 75, an unsecured pension gives you an income from your pension fund by using income withdrawal or a short term annuity. The rest of your pension fund stays invested.

Your pension provider will review the amount of income you withdraw every 5 years as it must be below the limit set by HM Revenue & Customs (HMRC). It is, however, important to regularly check that your fund is growing enough to make up for the income you're taking from it.

By your 75th birthday, you must secure your pension income either as an annuity or as an alternatively secured pension.

Alternatively Secured Pension

An alternatively secured pension has some similar characteristics to an unsecured pension but takes a much more restricted form. 

It can only start when you're 75 and, as such, is your main alternative to an annuity with the potential for a percentage of your assets to be passed on to future generations.

Drawing Your Pension Benefits with Legal & Medical 

To find out more about the various options for drawing your pension benefits and how Legal & Medical can help you choose the optimum route for you and your individual needs, contact us today or email This e-mail address is being protected from spambots. You need JavaScript enabled to view it

The tax reliefs referred to throughout this website are those currently applying in the United Kingdom to UK Tax Residents. These tax reliefs are liable to change. The value of any tax relief available will depend upon the individual circumstances of the taxpayer.