As we nearly approach the one year mark since the introduction of the new pension freedoms, nearly 400,000 payments worth £3.5 billion have been made to customers from pension pots between April and December 2015, according to figures published this year by HMRC.
Many pension savers are making the most of the new pension freedoms launched last year, and accessing their pension savings in a way that suits them best. One such way is to fully withdraw your entire pension pot. The FCA reported earlier this year that more than 120,000 pensions were fully withdrawn between July and September 2015.
Withdrawing your pension pot is a seemingly attractive option, allowing you to withdraw either some, or all, of your fund as a cash lump sum, or through a series of withdrawals (known as Uncrystallised Fund Pension Lump Sum or UFPLS) from your existing provider*.
However, it is important that you consider the tax implications of this option as typically 25% of any withdrawal will be tax-free with the remaining 75% being taxed as income, potentially generating a large tax bill to pay.
Alternatives to a lump sum
But as well as withdrawing your pension, you have a range of other pension-income options to choose from. For instance, if you'd like the security of a guaranteed income for life, a pension annuity is still the only pension-income option which can offer this for you and, if required, a spouse.
Plus, as a Moneywise report last year revealed, many don't realise that certain medical conditions and lifestyle factors mean that you could qualify for up to 40% more pension income.
However once you have purchased an annuity, you cannot typically change your mind or cancel it once the cancellation period is over, which can seem off-putting to some. Nevertheless, it is vital you shop around for the best annuity rate as your provider may not be able to offer you the best rate in the market.
Therefore, to find the retirement solution for you, it's never been more important to compare all of your options in order to choose a product that best meets your needs.
To find out more, visit www.agepartnership.co.uk or call Freephone 08000 810 815.
It's recommended that you take a look at the Government's independent Pension Wise website, which can also help when making any decisions regarding your pension-income options.
* By taking a lump sum withdrawal your fund will reduce and the amount of money you have to turn into a future income will be lower.