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Unsure how to access your pension at retirement? Here’s what you need to know

Published: August 6, 2025 by Jennifer Armstrong

It’s been a decade since Pension Freedoms legislation gave retirees more choice. Yet rather than relishing the freedom the changes have provided, research suggests workers are approaching retirement unsure about the decisions they need to make.

Data published by PensionsAge in June 2025 suggests that only 47% of UK savers are aware of their options in retirement. In addition, just 27% said they understood the reforms and the implications.

The decisions you make at the start of retirement could affect your financial security for the rest of your life. So, the research suggests a worrying number of retirees could pick an option that isn’t right for them because they don’t have all the information they need.

You can usually access defined contribution pensions from age 55. Read on to find out more about the three main options.

1. Purchase an annuity

If you’d prefer to receive a regular income that you know you can rely on, an annuity may be a valuable option.

You can purchase an annuity with the money held in your pension, and it would then provide an income for the rest of your life. You can choose if you want this income to remain the same or rise in line with inflation each year.

The annuity rate affects how much income you’d receive, and it’s influenced by a variety of factors, such as your age. Annuity rates can vary significantly between providers, so comparing options with your financial planner could help you achieve a higher income in retirement.

In addition, you can select a joint annuity, which would continue to pay your partner a portion of the regular income, such as 50%, if you pass away first. This could be a valuable option if you’re planning for retirement with a partner and they rely on your income.

2. Take a flexible income using flexi-access drawdown

You can also take a flexible income from your pension, so you might increase or decrease the amount you withdraw depending on your needs.

While this flexibility is attractive to many retirees, it’s important to consider how sustainable your pension withdrawals are. You’ll be responsible for ensuring you don’t run out of money in the future. According to PensionAge, 45% of survey participants said they worry that the ability to take a flexible income would leave them without enough.

The money that you don’t withdraw will remain in your pension and is usually invested. This means it has the opportunity to deliver long-term returns, but that your money is exposed to investment risk.

So, while flexi-access drawdown gives you more freedom to use your pension savings how you wish when compared to an annuity, it comes with potential drawbacks too. A retirement plan could help you balance your short- and long-term income needs when using flexi-access drawdown. 

3. Withdraw lump sums

Finally, you can withdraw lump sums from your pension when you choose.

This could be a useful option when you want to boost your income for a one-off cost. In 2025/26, you can withdraw up to 25% of your pension tax-free, and you may choose to do that as a lump sum.

A June 2025 article in IFA Magazine found that more people are withdrawing lump sums from their pension as soon as they can. 120,000 people in the 12 months to the end of March 2024 did so, collectively accessing £2.2 billion.

While taking a lump sum can certainly be tempting, especially if it’s tax-free, you need to weigh up the pros and cons of doing so.

Taking a large amount out of your pension could mean you risk running out of money in your later years. Not only would the value of your pension be lower immediately, but it could also affect the long-term investment returns, which might mean you have less in your pension in the future than you anticipate.

You can mix and match the 3 ways of accessing your pension

You don’t have to choose just one of the above options when deciding how to create a pension income. You can mix and match – you might even decide to use all three.

For example, you might withdraw a lump sum at the start of retirement to kick off the next chapter of your life. You could use it to travel, renovate your home, or tick off some of the bucket list items you’ve been looking forward to.

Next, you might use a portion of your pension wealth to purchase an annuity that would create a reliable base income. Finally, you may access the money that remains in your pension flexibly and adjust the amount to suit your needs.

Your financial planner could help you assess which option is right for you

Even after understanding what your options are, it can be difficult to know which one is right for your retirement plans. However, according to the PensionAge report, just 29% of retirees said they would turn to a professional.

Working with your financial planner to create a bespoke retirement plan could mean you feel more confident accessing your pension and understand the effect your decisions might have. Please contact us if you have any questions about your retirement and accessing your pension.

Please note: This blog is for general information only and does not constitute financial advice, which should be based on your individual circumstances. The information is aimed at retail clients only.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. 


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