There’s a lot to think about when you start planning to retire. At the moment, you can start taking your pension savings any time from age 55, and this is increasing to age 57 from 6 April 2028. If you’re close to your retirement age, it’s worth looking at your options and considering if you should give your pension an extra boost by paying more in.
What are your retirement options?
There are three main ways to access your pension savings - and you can choose one or any combination of these options. Your choices really depend on your own retirement plans, and the money you have invested in your pension plan.
Spending time looking at your options now could help prepare you for a better retirement. Take a look at our video to find out more.
Retirement options video transcript
At the moment, when you reach age 55, you'll be able to access your pension savings, even if you're still working. This is increasing to age 57 from the 6th of April 2028.
So, whenever the time feels right for you, you'll find three main ways to enjoy the money you've saved.
Option one - take it all as cash:
You can have all your pension savings paid in one lump sum.
However, if you're planning to use this money to live on, you'll need to make sure it lasts for as long as you need it to.
You may also be able to take some smaller cash payments and spread them over a number of years. Any savings left in your plan will stay invested and aim to grow.
Either way, you should bear in mind that taking large sums of money from your pension savings could push you into a higher tax bracket. This means you'd need to pay more tax.
Option two - get flexible access to your savings:
If you want more control over the money you've saved, you can keep it invested in your plan while you gradually take the income you need.
As your money stays invested, it aims to grow.
But there’s a risk if your investments don't do well, or if you live longer than expected, your savings could run out earlier than you'd like.
Option three - buy a secure income:
You can turn your pension savings into a regular income - this is also called buying an annuity.
You give some or all of your pension savings to an insurance company, and in return they'll pay you a guaranteed regular income for the rest of your life.
Before going down this route, you'll need to be sure it suits your needs.
Because once you’ve bought a secure income, you won't be able to change your mind.
You can combine any of your three options.
And whatever you decide to do, you can usually take up to a quarter of your pension savings completely tax free.
Of course, there's no rush to do anything. You can leave your savings where they are until whenever you're ready.
To find out more about your retirement options, talk to your financial adviser, or visit royallondon.com/retirement
Considering your pension contributions
Your retirement options set out how you can take an income from your pension savings. But what if you could increase your pension savings before you start taking an income?
Depending on how long you have until you decide to dip into your pension, you might want to consider if paying more in now could give your pension a boost.
Any money paid into your plan is invested, so it's important to remember that it can go down as well as up and you could get back less than what you've put in. You should also consider the length of time your money is invested, as the closer you get to retirement the less time you'll have to recover any losses. Speaking to a financial adviser might be useful if you're unsure.
If you have a workplace pension, you should speak to your employer about making any changes to your contributions – they’ll tell you what changes you can make and when you can make them.
You can make a single contribution into your pension at any time. Your contributions may benefit from tax relief, if they do, then you’ll get extra help from the government to save for your future.
One thing to remember is that there is a limit on the total amount that can be saved each tax year whilst still receiving tax relief. For the 2022/23 tax year, you can get tax relief on contributions up to the greater of 100% of your earnings and £3,600.
There is a limit to the amount you can pay before you have to pay a tax charge. The limit is called the annual allowance and for the 2022/23 tax year it’s £40,000 - after that a tax charge may apply to your contributions. You can find out more in our pensions and tax - know your limits article.
It's important to consider whether increasing your pension contribution is a suitable option for you. Speaking to a financial adviser can help if you're unsure, as can contacting organisations like Pension Wise, who can offer you free and impartial guidance.
Our retirement planner is designed to give you an idea of what income you could get when you retire. Simply tell us a few personal details and how much income you'd like, and we'll let you know if you're on track. You can also do a quick comparison to see what effect making a few changes to your retirement plans might make.
Your pension in your pocket
Keeping an eye on your Royal London pension savings has never been easier thanks to our mobile app. Simple to set up. Quick and secure to access. And with helpful features including paying in, adding your beneficiaries, and more. All designed to make managing your pension even easier.
More help with retirement planning
The tax rules when you want to take money from your pension
We can’t personalise how much tax you might pay, but we can give you some general information about how tax works.
Six tips for your retirement plans
How to get you and your retirement plans ready.
The pros and cons of flexible retirement
Flexible retirement may sound like great option for people wanting to take things easier in later life, but it’s important to weigh up the practicalities.
State Pension Challenge
Find out what happened when we lived on the State Pension for a week.
5 easy steps to plan the retirement you want
No matter when you plan to retire, it’s never too soon to start thinking about the retirement you want. But you don’t have to be a pensions expert. Spending a bit of time now working out what you’ve got so far could help prepare you for the future and a better retirement.