What are my options for taking income from my pension — and how do I choose?

Once you reach the minimum pension access age, there are broadly three ways to take income from a defined contribution pension (one where your pot size depends on what has been paid in and how investments have performed).

**Annuity.** You exchange some or all of your pot for a guaranteed income paid for life, or for a fixed term, by an insurance company. The income amount is fixed at the point of purchase and does not change with markets, which provides certainty but less flexibility.

**Drawdown (flexi-access drawdown).** Your pot stays invested and you withdraw income as and when you choose. UK savers entered drawdown roughly four times as often as they bought an annuity in 2024/25. Because the money stays invested, it can grow — but it can also fall, and there is a real risk of running out of money if withdrawals are too high or markets perform poorly. From April 2027, unspent funds in drawdown may form part of your estate for inheritance tax purposes, adding an estate planning dimension to the decision.

**Taking lump sums (uncrystallised funds pension lump sum, or UFPLS).** You take one or more lump sums directly from the pension, with 25% of each withdrawal typically tax-free and the rest taxed as income.

Many people use a combination of these options. Key factors that typically influence the choice include your health, other income sources, how long you might need the money to last, tax position, and whether you want to leave money to family.

A regulated financial adviser can assess your full circumstances and help you work out which combination suits your situation.