Accessing pension benefits early is not suitable for everybody and is likely to reduce your income at retirement. It is important to carefully review your individual circumstances before making a decision.

The pensions market is constantly evolving and changing, with legislation being regularly updated. When you are planning for your retirement, these frequent changes can make it difficult to make the right decision. However, our team of financial advisers are always on hand to help you make sense of it all.

Here we will explain some of the options available in our basic guide to personal pensions. Please note that this information is intended as rough guidance only. If you would like specific advice on anything to do with pension planning, get in touch and we will work with you.

Personal pensions involve paying a lump sum or a regular monthly or annual amount to a pension provider such as a bank or building society, who will invest it for you so you can access it when you retire. You may access your pension savings as much as you want after the age of 55.

The value of pensions can fall or rise depending on market conditions, meaning you may not necessarily get back the full amount you originally invested; the final value will depend on how much you have paid in and how the fund’s investments have performed.

These kinds of pensions may be the right choice for you if you are self employed, unemployed but with cash to put aside for retirement, or if your workplace does not offer a company pension scheme. However, many people also choose personal pensions to supplement their existing company pension.

You can also place money into somebody else’s personal pension, for example your spouse or partner. Your tax bill will not be affected, but they will receive tax relief at the basic rate. Taxation reliefs and levels are dependent on the individual circumstances of the investor, and could be subject to changes.

There are three main options when it comes to personal pensions, and you can also combine them together depending on your personal requirements. The options are:

Lifetime Annuity

You may use some or all of your pension funds to purchase an annuity, payable for the rest of your life. When you choose this option you will be able to take a lump sum of up to 25% of your pension pot at the same time, tax free.

Flexi-Access Drawdown

Since April 2015, there have been no limits on the amount of money you may take from your drawdown fund every year. As with a lifetime annuity, when you opt to place your funds into a drawdown, you may take a tax free lump sum of up to 25% of your pension pot.

Lump Sum

This simply involves taking money directly out of your pension pot, 25% of which will be tax free. This is referred to as an uncrystallised funds pension lump sum (UFPLS).