When?

Currently, you are allowed to draw on a company or personal pension after you reach age 55. However, you do not have to take it until you are 75, at which point you are forced to buy an annuity.

In some extraordinary circumstances, such as being unable to work due to illness, you may be able to take your pension before 55.

Can I get it all as a lump sum?

Not unless your pot's worth less than £18,000.

Once you've reached 55, you can withdraw up to 25% of your pension in a tax-free lump sum. (Note that this is only tax-free if worth less than the 'lifetime allowance' for that tax year, currently £1.8m.)

For those with smaller pots worth under £18,000, it is possible to withdraw all the money as a lump sum. However, only 25% of this will be tax-free.

What next?

The rest of the money in your pension fund can be used in one of two ways.

Initially, you may draw a taxable income directly from your pension fund, as an 'unsecured pension' before age 75. This is commonly called 'drawdown'.

Once you reach 75 you are required to buy an annuity (although the coalition government has suggested that it may scrap this prerequisite).

However, you can buy an annuity at any time and may choose to do this simply because it guarantees you a set income for the rest of your life, no matter how long you live.

You're essentially buying an insurance product with your entire pot, which means the more you invest in buying an annuity, the greater your yearly income will be.

If you opt for 'drawdown', you are effectively reducing the amount you will eventually receive in annuity payments. But this does allow greater flexibility and access in the short-term.

How to buy an annuity

You don't have to buy the annuity offered by your pension provider. Under the Open Market Option (OMO), all pension policyholders are entitled to shop around for the best annuity rates. See the annuity page.