Pension options at retirement
We offer a range of flexible options for accessing your pension. There are no hidden costs – it’s all included in your SIPP fee.
COVID-19 - current market conditions
Making decisions about your SIPP based on short term circumstances - especially at a time of market volatility - can have significant long-term consequences for your financial wellbeing and retirement.
If you access your SIPP benefits now, you might miss out on any increases in value in the future if markets recover. You will receive only the current value of your SIPP investments (which might have fallen recently), and this may be taxable.
If you would like to explore the risks and options in more detail we recommend that you seek the advice of a suitably qualified financial adviser.
Pension options: what you need to know
Deciding how to use your pension to meet your income requirements is not always easy. If you have any questions, we recommend speaking with Pension Wise or an independent financial adviser.
You might find that combining several pensions into a SIPP makes retirement planning simpler. You should take advice on this.
Some options are irreversible, so make sure you are certain before you go ahead.
Your pension options with ii
Income drawdown
Take a tax-free lump sum of up to 25%. Then withdraw the remainder as and when you need it.
You can either take a regular monthly income, dip into your pot when you need to, or even take the whole amount in one go.
Lump sums (UFPLS)
Take your pension in lump sums, as and when you need them.
The first 25% of each lump sum is tax-free, and the rest is taxed as income.
The funds you don't withdraw are left invested.
Annuity (with another provider)
Get a guaranteed income in return for some or all of your pension pot.
Annuities offer security, but are not as flexible as other options. Depending on your circumstances you may get less back overall.
- ii does not offer an annuity directly, but you can take money from your ii SIPP to purchase one. To do this you will need to complete and return a Taking Pension Benefits form.
- Learn more about annuities
A combination of the above
Some people choose to take more than one option. For example, you could take a small annuity and the rest of your pension as drawdown. This might give you a good balance of security and flexibility.
Leave your pot untouched
You may be able to delay retirement and leave your pension pot untouched. If you do, the pot will continue to grow tax-free and provide you with a greater income when you need it.
FAQs
What are the differences between flexi-access drawdown and UFPLS?
With flexi-access drawdown you can take up to 25% of your pension tax-free. When you’re ready, you can start taking income from the remaining 75%, which will be taxed as income.
Taking this taxable income will trigger the MPAA, which reduces the amount you can contribute into your pension to £4,000 a year.
With UFPLS, you take your pension in lump sums. 25% of each lump sum is tax-free, and you’ll pay tax on the remaining 75%. Taking UFPLS triggers the MPAA right away.
Can I start taking a pension income while I’m still working?
Yes. You can access your pension as soon as you turn 55 (57 from 2028). Bear in mind that the sooner you start taking pension income, the sooner it could run out.
Some people have a ‘phased retirement’, where they work less and start taking a small pension income to make up the difference. They can then move into full retirement when they are ready.
What is the Lifetime Allowance on pensions?
The current Lifetime Allowance (LTA) is £1,073,100. This is the total amount you can withdraw from a pension without paying extra tax charges.
If you exceed the lifetime allowance, you may have to pay 55% tax if you are taking a lump sum, or 25% (plus income tax) if you take it any other way.
Open a SIPP today and pay no SIPP fee for six months.
This means your service plan fee of £9.99 covers you for all of your investment accounts. Following the offer period, the ii SIPP fee is only £10 a month more, and could save thousands compared to other pension providers who charge a percentage fee. Terms apply