Your employer Retirement Plan

Approaching retirement

As you approach retirement, you'll need to think about what to do with your pension pot. A number of options will be open to you when you retire. Standard Life will contact you nearer the time to give you more details but, in the meantime, here's a summary of your main options.

Ways to take your benefits

Option 1 - Buy an annuity
Most people in defined contribution pension schemes use an annuity to provide their retirement income. Under the Plan, you can use your pension pot to buy an annuity from an insurance company, which would then provide you with an income for the rest of your life. You would have to pay tax on this, just as you would on your salary.

Once you buy an annuity, you can't usually change it. So consider your needs carefully to be sure your choice is appropriate. With an annuity, you can also choose a smaller pension for yourself and include a spouse's or dependant's pension when you die. You can also choose to protect your income against future rises in inflation.

You also have the option of taking part of your pension as a tax free lump - typically up to 25% of its value. This gives you added flexibility, but remember, it also means you'll have a smaller pot when buying an annuity and you should therefore expect a smaller retirement income.

Option 2 - Income drawdown
If you manage to save up a larger pension pot, you might be able to take your retirement income through income drawdown. This is a way of taking some income from your pension pot as and when you need it, while keeping the rest of your pot invested. You still have the option of taking part of your pension pot as a tax free lump sum - up to 25% of its value.

Lifetime Allowance

Pension savings that exceed the Lifetime Allowance are subject to tax charges. Currently, tax is charged on the excess at the rate of 55% for retirement income taken as a lump sum and at the rate of 25% for income taken as a pension.

For more information on income drawdown see the Tax relief, limits & your pension document.

What if your pension pot is smaller?

You may have several pension plans. If the total value of your entire pension savings and benefits is less than £18,000, you may be able to take the whole pot as a lump sum. The first 25% of this will be tax free, with the remainder taxable as part of your income. This option is known as trivial commutation and is only available from the age of 60.

Tax laws are set by HM Revenue & Customs and may change in the future.

Read the Key features document to understand the retirement options in detail.

Useful tools

Retirement planner