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What does it mean to draw a retirement income?

If you are wondering how to generate an income, once you stop earning a salary from your business or employer, then you will want to understand how to draw an income from your pension(s) or retirement savings. A regular source of money to live on, potentially drawn from your savings and pensions. 

There are a range of ways to achieve an income in retirement. We can help advise you on how to generate a tax-efficient income and how to make the most of your money in retirement.  

This page focuses predominantly on starting to draw an income but if you want to understand how your retirement fund is shaping up, what it might afford you and what your timelines are, then it works well in conjunction with our pension planning and advice guidance. 


Are there alternatives to an income from a personal pension? 

There are a host of alternative options, such as working longer through an existing or alternative full time, part time or consulting role, adjusting or downsizing your lifestyle, through to generating an income through property; either by letting additional properties, downsizing or using income release products to free up capital from the value of your main home.

Whilst these are feasible options, this page focuses purely on the options for those looking to draw an income from a pension or SIPP. 


All information here is general guidance, rather than personal advice and offers a light touch overview, rather than an exhaustive guide for decision making. 

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What about a State Pension?

State pensions are currently available to eligible individuals, once they reach state pension age, and providing they have enough National Insurance qualifying years. The age you can receive state pension benefits will depend on the rules at the time you approach retirement and are based on when you were born and currently, your gender. The amount you receive is subject to change but can currently be increased if you are willing to defer the start date at which you begin drawing a state pension, to a later age.

It is important to state that what is in place today, is not guaranteed to remain in place by the time you retire. For more information visit 

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When should I start drawing an income from my pension?

You can start drawing an income from your personal pension at any age from 55 onwards (rising to 57 in 2028). However, the earlier you retire and start drawing an income, the fewer years you can save into a pension, and the smaller your pension pot will be. The pension pot will also have less time to generate returns before you start drawing an income from the savings.

What are some of the options available to me? 

Deciding how to draw an income from your pension investments can be a complex decision and it is worth taking the time to explore the options in detail, and potentially taking some professional advice. Options may include taking a lump sum, flexible access drawdown or buying an annuity, however, schemes vary and older schemes sometimes only allow the option of an annuity or taking benefits all at once. Though not covering all the options and tax implications, below we explore some of these common alternatives one at a time. 

Capital at Risk and Tax Treatment

The value of your investments may rise or fall and you may not receive back the same amount you put in when you choose to cash out your savings. Tax treatment depends on the individual circumstances of each client and may be subject to change in the future.

Taking a Lump Sum

You can choose to take a portion of, or the entire pension pot as a lump sum, although there will be tax implications. This provides immediate access to a large sum of money but reduces the amount available for generating future income. Up to 25% of your pension pot can be taken as a tax-free lump sum (the remaining 75% will be taxed), and used for various purposes, such as paying off a mortgage, funding home improvements or a lifelong goal, or investing in other assets. 


Income drawdown 

Another option is to take a flexible income from your pension pot while it remains invested, which can be good if you consider that many people are living for longer periods. You can choose how much to withdraw each year, and the remaining pot can remain invested, to continue to grow tax-free. If you have not taken a lump sum, 25% of these regular withdrawals will be tax-free, with the remaining 75% taxable at your marginal tax rates. 



An annuity is a contract with an insurance company that provides a guaranteed income stream for life or a specified period. You exchange your pension pot (or a portion of it) for a regular income, ensuring a steady flow of payments regardless of market fluctuations. The annuities market has changed dramatically over the years and the amount that your pension pot will achieve as an annuity income can fluctuate with economic factors, so as with all options, it is worth considering timings around these decisions. 

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Making your money last

Retirement poses a unique financial challenge: managing a finite amount of savings to last throughout your lifetime. While investments can help your savings grow, balancing risk and inflation is crucial. Prudent budgeting, emergency funds, and planning for future expenses are essential. However, factoring in things like potential healthcare costs, inheritance plans, and maintaining your desired lifestyle can be complex. Seeking professional financial planning advice, including lifetime cashflow analysis, can help you navigate these considerations and help ensure your savings last as long as you need them. 

We have a range of Killik Explains educational videos on this subject of drawing an income in retirement and below also a suite of How to Guides.

Contact us

Enquire today

Talk to an Adviser:

+44 (0) 20 7337 0777