In March 2015, the UK Government introduced major UK pension reforms – offering greater flexibility to how people approaching retirement access their pension funds.

Savers are now able to access the entirety of their pension at any time after the age of 55, as well as take up to 25% of their retirement savings tax-free. Prior to the reforms, taking any of the remaining 75% as instant cash was subject to a penalty tax of up to 55%. Rather than lose over half of their savings in this way, the vast majority of people used their pension savings to buy an annuity – providing a guaranteed regular income, usually for the rest of your life.

While guaranteed income from an annuity is still one of the most popular retirement choices, alternatives such as flexible drawdown have become more accessible and have become more popular.

Each retirement income option offers distinct pros and cons. Annuities still offer the greatest security by guaranteeing your income for life, and are available in a range of options that can be tailored to your needs – such as joint life annuities, escalating annuities and enhanced annuities. Drawdown options could mean a high income with more flexible access to your pension pot, but you need to consider the possibility that your savings could run out before you die.