Do I need to take a lump sum annuity?

Although most people decide to take a tax-free cash sum up front, you don't have to. You could keep it in your pension fund and use it to buy a larger retirement income. However, as the income payable through a personal pension or retirement annuity policy is taxable, this may not be the most tax-efficient way to provide any extra cash flow you need. You will lose any right to a tax-free lump sum if you are not paid it before your 75th birthday.

An option might be to consider using your tax-free cash sum to secure what is known as a purchased life annuity where only a part of the income is taxable. Your Financial Adviser can help you with this.