Pension options at retirement

Q: 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.

Q: 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.

Q: 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.

We offer a range of flexible options for accessing your pension. There are no hidden costs – it’s all included in your SIPP fee.

Withdrawing money from your SIPP
FAQs
Pay no SIPP fee for 6 months

Please remember, SIPPs are aimed at people happy to make their own investment decisions. Investment value can go up or down and you could get back less than you invest. You can normally only access the money from age 55 (57 from 2028). We recommend seeking advice from a suitably qualified financial advisor before making any decisions. Pension and tax rules depend on your circumstances and may change in future.

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 (a service from MoneyHelper), 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.

Withdrawing money from your SIPP

You can withdraw money from your pension once you reach 55 (57 from 2028) - although you don't have to.

We offer a range of flexible options for accessing your cash:

Take a tax-free lump sum

You can take up to 25% of your pension tax-free, even if you don't plan to take the rest until later.

Income drawdown

Take a tax-free lump sum of up to 25%, and set up regular or one-off payments for the rest.

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.

Learn more about annuities
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.

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 - for example, if you have other sources of income. When you die, any remaining pension can be passed on to your beneficiaries - tax-free if you die before the age of 75.

Leaving your pension untouched can also give it more time to grow, although it could also shrink if your investments underperform.

How can Pension Wise help?

If you have a defined contribution pension scheme and are 50 or over, then you can access free, impartial guidance on your pension options by booking a face to face or telephone appointment with Pension Wise, a service from MoneyHelper.

If you are under 50, you can still access free, impartial help and information about your pensions from Moneyhelper.

Find out more

FAQs

What are the differences between flexi-access drawdown and UFPLS?

Can I start taking a pension income while I’m still working?

What is the Lifetime Allowance on pensions?

New to ii? New customers who open a SIPP before 31 August will pay no Pension Builder subscription fee for six months - a saving of £12.99 a month. Terms apply.

Open a SIPP