Your options

Using your savings

It’s important to think about your retirement options

The money you save in the SEI Master Trust is your money so you decide where it’s invested, how you take it, and when you take it (once you have reached your 55th birthday or 57th birthday from April 2028).

Here’s a brief summary of some of your options when you come to take your benefits. You can read our Retirement Guide to find out more.

Option 1: Cash

Take all of your pension account as one big cash lump sum. 25% of it would be tax free, and the rest is taxed as earnings (i.e. 20%, 40% or 45%).

If you take your pension account as a single lump sum you may be charged more tax than you’re expecting.

Important things to think about:

  • It’s one lump sum, so what if you live longer than you expect? You’d become more reliant on your State Pension.
  • What happens if you spend it all? Do you have other income? How will you be paying for your lifestyle in the future? Will you have to make drastic changes?
  • You may end up paying more tax.

Option 2: Flexible income

This is also called drawdown. Under this option you take smaller lump sums from your pension account as and when you need them and the rest of your pension account remains invested until it runs out.

If you took this option, you’d have to decide how you take the 25% tax-free cash portion. You could take it as one whole amount or share it evenly across every lump sum.

Important things to think about:

  • You could live longer than you think, so you need to make sure you don’t run out of money.
  • Your investments can go up as well as down. This means your pension account may not grow as well as you expect.
  • You may end up being pushed into a higher tax band.

Option 3: Guaranteed income (an annuity)

Under this option you use your pension account to buy an insurance policy (an annuity). You choose the type of income you want, whether it should continue in the event of your death, and you get a guaranteed set amount based on your request.

There are lots of annuities on the market and lots of options for you to consider so it’s wise to shop around and choose one that best suits you. You can use this page from MoneyHelper to get started.

Important things to think about:

  • You need to shop around to make sure you get the best deal because different providers offer different rates.
  • It’s not very flexible. Once you start taking your pension, you can’t change it.
  • The annual income you will get depends on the type of annuity you choose.
  • You may need to live a long time to get maximum benefit from the policy.

What else can you do?

  • You can mix and match the options above, depending on what’s best for you.
  • You can do nothing and leave your pension savings in your pension account until you are ready.
  • You can transfer your pension account to another scheme.

Important note: If you start taking your retirement benefits and still want to carry on saving into your pension account, be aware of the Money Purchase Annual Allowance.