What are your options for accessing your pension savings?

Last year, the way you could choose to access your pension savings underwent one of the biggest and most exciting changes to the UK pensions system for a century, but with more choice available than ever before, it can be confusing understanding the various pension-income options available.

Here's an overview of some of the ways you can choose to access your hard-earned savings;

Pension Annuity

Offers a guaranteed income for the rest of your life, regardless of how long you live. The amount you receive will depend on a number of choices, such as whether you want the income to remain the same or increase over time, and whether you want some/all of the income to continue for a spouse or partner after your death.

It's important to shop around for an annuity rather than simply accepting the rate that an existing provider offers because health and lifestyle factors may mean that you can qualify for up to 40% more pension income. (1)

Pension Drawdown

A flexible way to access your pension savings and efficiently manage your tax bill. It offers a solution for those who want to keep on-going flexibility to potentially select an alternative pension-income option in the future. As any savings remain invested, there is the potential for continued growth in value.

That said, it's important to remember that the value of your savings and any income taken from them may go down as well as up and there is no guarantee of investment performance meeting your future income needs.

Fixed-Term Annuity

Offers a guaranteed income for a period of between 1 and 25 years through a non-advised service or up to 40 years via a Financial Advisor. You can choose the level of income you receive and will know exactly how much you'll have left at the end of your chosen term to select another pension-income option should you wish, however it is not possible to know how much income that will secure for you in the future as the economic climate may change.

Pension Withdrawal

Allows you to access your pension savings by taking some/all of your pension savings as a cash lump sum, or series of withdrawals from your existing pension provider. However bear in mind that while typically 25% of any sum taken will be tax-free, the remaining 75% will be taxed as income at your marginal rate, meaning you could pay as much as 40% tax or maybe even more. (2)

Whilst further choice and greater flexibility is positive news, it's never been more important to shop around to make sure you find the best income option for you. Navigating how to access your pension savings in the most suitable way to meet your needs can seem overwhelming and so anyone who is unsure should consider seeking a professional, impartial recommendation from a financial advisor.

Use our online calculator to compare your pension-income options

To find out more, visit www.agepartnership.co.uk or call Freephone 08000 810 815.

(1) Research by the Money Advice Service shows that the usual increase based on health and lifestyle factors is up to 40%.

(2) By taking a lump sum withdrawal your fund will reduce and the amount of money you have to turn into a future income will be lower.