Pensions Guide | Pensions Help Product Information | What Happens When I Retire?

Your pension will be paid through an annuity. An annuity is an arrangement by which a life insurance company pays you a regular income, usually for life, in return for a lump-sum premium. You buy an annuity with the money invested in your stakeholder pension. You do not have to buy an annuity from the scheme provider you have had your stakeholder pension with, so shop around to compare what other companies have to offer.

You can buy an annuity between your 50th and 75th birthdays, using the money you have contributed to your pension fund. This annuity is usually paid every month (but must be paid at least once every year) until you die. However, you cannot buy an annuity before the age of 60 with the part of your pension fund that has been built up from rebates of National Insurance contributions (if you contracted-out of SERPS or the State Second Pension).

You could also think about whether your pension fund is large enough for you to withdraw money from it instead of buying an annuity straight away (this is called income withdrawal or ‘drawdown’). There are limits to the amount you can withdraw from your pension fund, and you must still buy an annuity by your 75th birthday.

If you are not sure what to do for the best, you may want to get advice from a financial adviser. But remember, if you see an adviser you may have to pay for their advice.