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How do my contributions become a pension?

To change your Pension Account into an annual income you have three options available:-

- take all of your Account as cash. This is known as an Uncrystallised Pension Lump Sum (UFPLS) and you can take 25% tax-free with the remainder taxed at your normal tax rate.

- take an income directly from your Account on a regular basis with the balance remaining invested. This is known as Flexible Drawdown. You will need to transfer your Account to another DC arrangement if you wish to take this option.

- take all or most of your account as an annuity, (an annuity is the formal name for a pension from an insurance company), with the balance as a tax free cash sum. The exact amount of tax free cash will depend on government rules, but currently you can take up to 25%.

Types of Annuity

Depending on your circumstances you can choose an annuity that is only paid to you and ceases when you die, or, if you are married or in a civil partnership, you may choose an annuity that provides for your partner when you die. A further option is to buy an annuity which rises each year, e.g. by 3%, to help protect against the effects of inflation.

If you have a medical condition or lifestyle which you believe will shorten your life expectancy, you may choose to buy an impaired life annuity.  This will provide a higher level of income than a standard annuity package.

You don’t need to decide what type of annuity you would like until you retire, at which time you can choose to buy an annuity from any provider in the market. We have an annuity purchase service to help you buy the most suitable annuity for your retirement.