It used to be that when you retired, you could only buy an annuity with your pension pot. But the government has changed that so that now you have got three options:
Buy an annuity – this is an insurance policy that gives you an income for the rest of your life
Take flexible income – this means your pot stays invested while you take money from it
Take the cash – you get your money back all in one go. About 25% of your pot will be tax free.
Wait! Don’t make any quick decisions about which option you want to take. There is free guidance available from the government with Pension Wise, so take a look at that service first. Visit www.pensionwise.gov.uk. If you are in your 50s you can make an appointment to speak to a specialist by visiting www.pension.gov.uk/appointments.
Remember: these rules will only affect you if you have a ‘defined contribution’ pension. Over 300,000 people retire each year with a ‘defined contribution’ pension. If you don’t know whether you have got a defined contribution pension or not, ask your pension provider.