What pension options do I have?

If you've saved into a defined contribution pension scheme during your working life, you need to decide what to do with the money you've saved towards your pension when you retire. 

What is a pension pot?

Your pension pot is the total amount of pension contributions you and/or your employer have made to save for your retirement. Your pot also includes any capital growth earned from the fund’s investments, depending on how your scheme was set up.

Your pension pot doesn’t include your State Pension which is provided by the government.

Your fund should send you a pension statement once a year that tells you how much your pension pot is worth, or there may be an option to check this on their website.

If you’ve made pension contributions into multiple pension pots then you’ll need to contact each fund separately for a statement.

When can I withdraw money from my pension pot?

You must have reached a certain minimum pension age set by your pension fund provider to access your pension pot – usually 55 years.

You may be able to withdraw your pension earlier if you’re retiring because of poor health or disability, but the rules depend on your pension scheme.

Be aware of pension scams as you are nearing pension age. Fraudsters are more likely to approach you with advice about withdrawing and investing your pension. They may attract you by making a false claim that you can access your pension before you’re 55.

How can I use my pension pot?

You have the freedom to choose how you use each of your pension pots, based on what best suits your needs. Each option comes with its own set of rules, fees, benefits, risks and tax issues.

Deciding what to do with your pension pot can be complicated – there are many factors to consider and financial terms to understand. 

You don’t have to rush into anything. It's a good idea to take some time to consider all of your options so that you don't end up in a situation where you’re unable to use your pension pot money, or the money has run out. Think about your:

• lifestyle
• partner or family
• age
• long-term health and life expectancy
• current and future care needs
• other sources of income.

Not all pension schemes and providers will offer every option. Talk to your pension fund provider to find out what’s available. Your options may include:

• doing nothing – leave your money invested in your pension scheme
• withdrawing some or all of your pension pot as a cash lump sum
• buying an annuity
• investing part or all of your pension onto the stock market (this is known as 'income drawdown')
• a mix of these options, depending on the size of your pension pot.

It's a good idea to seek advice from a regulated independent financial adviser before making any decisions and consider all your options carefully.

Possible affects on means-tested benefits

How you use your pension pot can affect any benefits you currently receive or your eligibility to claim a benefit in the future. This is because withdrawals or investments may be counted as income or capital, which may affect means-tested benefits.

Means-tested benefits include:

• Pension Credit
• Housing Benefit
• your local authority's Council Tax Reduction Scheme
• Income Support
• Income-based Jobseeker's Allowance
• Income-related Employment and Support Allowance

If you spend or give away money (including tax-free cash) from your pension pot to get or increase your benefits, the Department for Work and Pensions (DWP) or your local council may re-assess your eligibility and treat you as still having that money.

What should I do next?