How to find the best deal when taking your pension

If you have a defined contribution pension, you need to decide how and when you’d like to take your money. 

You can find out your pension type using our tool or ask your provider. 

To find the best pension provider for you, start by checking what you could get by staying with your existing pension provider.

This includes checking:

• if your provider offers the income option you’d like

• how much you’d get if you used their product – you can usually ask them for quotes 

• what the product options and fees are

• if there are any penalties for transferring to a different provider, like an exit fee

• if you have any special features, such as: 
  • guaranteed annuity rates – this might let you convert your pension into higher guaranteed income than you could get elsewhere 
  • a protected minimum pension age – this might let you access your pension earlier than other schemes could
  • a ‘with-profits’ bonus – this is an extra payment you might get if you wait to access your pension after a certain age.

Next, check if you can get a better deal from a different provider. How to compare depends on the way you’d like to take your money.

If you want to take your pension in one go and your existing provider allows this with no penalties, there’s usually no need to compare other providers. 

An annuity lets you convert some or all of your pension money into guaranteed income, either for life or a fixed period.

You can use our Annuity comparison tool to see what different providers will offer you. 

You can also:

• get quotes by contacting different annuity providers yourself – many insurance companies sell annuities

• pay a financial adviser to recommend a product for you – advisers might be able to access better annuity rates than are available to you directly.

The annuity rate you’ll get depends on many factors, including:

• your age and health – you might qualify for higher rates if you have a medical condition

• how long you’d like the income to last for

• the options you choose, including: 
  • income that increases or stays the same each year
  • if your annuity will continue paying out after you die.

For example, if you converted a £100,000 pension pot, an annuity rate of 5% would give you an annual income of £5,000.

Find out more in our guide Take your pension as guaranteed income: annuities explained.

 Pension drawdown lets you:

• take up to 25% upfront as tax-free lump sum (or as much or as little as you need at the time)

• leave the rest invested until you to want to take the money.

You can then normally choose to: 

• take lump sums as and when you want

• take a regular income

• buy an annuity for guaranteed income.

You can use our Investment pathways comparison tool to find drawdown providers that offer different ways to take your money and ready-made investment options. 

You can also: 

• manually compare drawdown providers yourself – many pension providers offer drawdown

• pay a financial adviser to recommend a product for you.

When comparing, make sure to check:

• if the provider offers the way you’d like to take your money

• how your money would be invested

• if you can choose your own pension investment options

• what you’d need to pay – including an annual management fee and charges each time you take money.

If a new provider offers a better deal, consider transferring your pension. But always check if you’ll lose any benefits before switching away. 

Find out more in our guide How to transfer or combine defined contribution pensions. 

If you pay for regulated financial advice and it turns out to be poor, including if you lose money as a result of bad advice, you can complain and ask for compensation. 

For more information, see our guide How to claim compensation for a pension problem or poor advice.  

If you’re using a financial adviser, they can usually set up the annuity or drawdown product for you. 

If you’ve chosen the product yourself, check what you need to do to apply and how long you have to change your mind – an annuity usually cannot be cancelled after your 30 day cooling off period has ended.

If you’ve decided to transfer your pension to a different provider, find step-by-step help in our guide How to transfer or combine defined contribution pensions.  

Do not transfer your money to a new pension provider or invest any money because of a cold call, visit, email or text – it’s likely a scam. You could lose your money and face a large tax bill. 

For more information, see our guide How to spot a pension scam.

When your first payment is made, a temporary or emergency tax code might be used. This means you could pay too much Income Tax. 

If you think you’ve overpaid tax, you can check how to claim a tax refundOpens in a new window on GOV.UK. HMRC might also pay it back to you automatically at the end of the tax year. 

For more information, see our guide How tax works on pension income.

If part of your pension remains invested, its value can rise and fall until you choose to take it. 

Depending on how well it performs, you might want to consider changing how your pension is invested or the way you take your money.

It’s also worth comparing pension providers at least once a year to see if you might be better off transferring your pension elsewhere.

For more information, see our guides: 

• How to choose your own pension investment options

• How to transfer or combine defined contribution pensions