Moira O’Neill of the Observer Writes :
It’s time to retire, and you might think you have done all the hard work in building up your pension pot. But converting your nest-egg into income will be the most crucial financial decision of your life.

The traditional way is to use the capital to buy an annuity – an annual income from an insurance company. The rate of income paid by annuities has been on a long downwards slope, but rising interest rates mean there are signs of improvement.

Also known as income drawdown or pension fund withdrawal, these let you draw an income directly from your pension fund while the fund remains invested. The maximum level of income you can draw is about 120 per cent of the level lifetime annuity payable to a single person of your age and sex; the minimum is zero. You can use your remaining fund to buy a lifetime annuity at any time.

Anyone in a personal or stakeholder scheme can use an unsecured pension, apart from those with very small funds. If you want an unsecured pension but your employer’s scheme doesn’t offer it, you can transfer your pension rights from that scheme into a personal pension scheme. However, you may lose any entitlement to a tax-free cash sum greater than 25 per cent of the fund value….