There are several different ways of using your Personal Account when you reach retirement. Which one is best for you will depend on what other pensions or savings you have, how much you want to live off, and how much security you want from your retirement income.

If you would like the security of a predictable monthly income, you can use your Account to buy an annuity. This is an income for life provided by an insurer. There are lots of different annuities available, offered by a range of different providers. You can find out more about annuities here.

If you want to generate an income from investments, or have other pensions and savings that mean you are not relying just on your AXA pension, then you can keep investing your Account and take money from it over the course of your retirement. This is known as income drawdown and you can find out more about it here.

Alternatively, you could just take your Account as cash. It’s important to think about the potential tax implications of this and whether you’ll still have enough money to support yourself in retirement. Read more about this option here.

Whatever option you choose, you can take up to 25% of the value of your Account as a tax-free cash lump sum. The rest of your money is taxed as income as you receive it. You can also choose a mix of the options – for example buying an annuity with some of your Personal Account and using the rest for drawdown. 

Drawdown gives you a lot of flexibility around how you take the money from your Personal Account. You can arrange this with a drawdown provider who will let you invest your Personal Account while also drawing an income from it. This can be a regular monthly income, or you can take out sums of money as and when you want.

Because your money is still invested, there is the opportunity for it to grow and provide a greater income in retirement than you might get with an annuity. However, there is also the risk that you spend more than your investments make, and so run out of money.

If you choose to take an income from your drawdown arrangement, the most you can pay into any pension arrangement and receive tax relief on will be reduced (see Limits on your pension savings for more information).

You also keep the option to use your fund to buy an annuity at a later date if you want to.

When thinking about drawdown, you will need to consider the fees that any provider will take for managing your funds, how much you will need to make in investments to cover your withdrawals, and how long you expect to live for.

If you decide to use your fund for income drawdown then any funds that are left can be passed on to your chosen beneficiaries when you die. If you were to die before age 75, the remaining amount could be passed on tax-free. After 75, they may be able to continue with the drawdown account and any income taken would be taxed at the recipient’s marginal rate. 

There are two options available to you to take your Personal Account as cash.

1. You can take the entire value of your Personal Account as a cash lump sum (known as an Uncrystallised Funds Pension Lump Sum (UFPLS)). Although the first 25% of this sum will be tax-free, the rest will be taxed. You will need to check the value of your Personal Account and other taxable earnings (salary, other pensions etc.) in that tax year, as it may mean that you end up with a very large tax bill. You can use the Aegon's website to help you estimate this.
2. A partial UFPLS where you can choose to keep your Personal Account invested in the Scheme and take up to two cash withdrawals per year (up to the age of 75). 

If you choose one of these two options, the most you can pay into any pension arrangement and receive tax relief on will be reduced (see Limits on your pension savings for more information). If you decide to take your Personal Account as cash, you will need to carefully consider if you will have enough other sources of income to fund your retirement. 

You might want to watch the video below, prepared by Aegon, which summarises the different retirement options in further detail. We also encourage you to read our Retirement Options Guide.