Pension freedoms, what are the options?

Pension freedoms created more options when it comes to retiring, but they can be confusing.


Seeking advice will help you pick the right option for you.


Under the new flexible rules you can mix and match your options.

Leave your pension pot untouched

You might be able to delay taking your pension until a later date. Your pot then continues to grow tax-free, potentially providing more income once you access it.

Use your pot to buy a guaranteed income for life – an annuity

You can choose to take up to 25% of your pot as a one-off tax-free lump sum. You can then convert the rest into a taxable income for life, this is an annuity.

Use your pot to provide a flexible retirement income – flexi-access drawdown

With this option you take up to 25% of your pension pot as a tax-free lump sum, then re-invest the rest into funds designed to provide you with a regular taxable income.

Unlike with a lifetime annuity your income isn’t guaranteed for life – so you need to monitor your investments regularly as there is a risk you could run out of money. Our ongoing service is a good way to do this.

Take small cash sums

You can use your existing pension pot to take cash as and when you need it, leaving the rest untouched where it can continue to grow tax-free. For each cash withdrawal the first 25% is tax-free and the rest is treated as taxable income.

There might be charges each time you make a cash withdrawal and/or limits on how many withdrawals you can make per year.

With this option your pension pot isn’t re-invested into new funds to pay a regular income. There are more tax implications to consider. It won’t provide for a dependant after you die.

Your pension pot will reduce every time you make a withdrawal so there is a risk funds could run out.

Take your whole pot as cash – in one go

You could take the all your pension pot as cash, in one go. The first 25% is tax-free; the remaining 75% will be added to your income and taxed at your highest tax rate. This could push you into the higher rate tax bracket of 40% or even the additional rate tax bracket of 45%.

With this option you could end up with a large tax bill and it won’t pay a regular income. Without careful planning, you could run out of money.

Mixing your options

You don’t have to choose one option– you can mix and match to take cash and income at different times to suit your needs. You can also keep saving into a pension, and get tax relief on savings up to £40,000 a year and up to age 75.

How we can help

To find out what option or combination is right for you book a face to face appointment with a Financial Adviser.

We also offer informal Big Talk retirement presentations, these last about 1 hour and we provide light refreshments. They are a great way to get more information. You will get the chance meet a Financial Adviser from Newcastle Financial Advisers and ask questions you may have. Find out when the next Big Talk presentation is.



Newcastle Building Society introduces to Newcastle Financial Advisers Limited for advice on investments, pensions, inheritance tax planning, and life cover. Newcastle Financial Advisers Limited is an appointed representative of Openwork Limited which is authorised and regulated by the Financial Conduct Authority.