MoneyAge recently reported on a worrying lack of knowledge among UK pre-retirees regarding their pension options. Just 42% have a firm grasp on their retirement options, while around 55% of over-55s don’t understand the choices they will face, despite respondents in that category fast approaching retirement age.
Working closely with Globe IFA means that you’ll be in the well-informed half, of course, but there’s still work to do. The “right” choice at retirement will be different for everyone and depends on numerous financial and lifestyle factors.
One option you might consider, for at least part of your retirement fund, is an annuity. Interestingly, MoneyWeek recently reported on record-breaking annuity figures for 2025. It found that rates increased by 5.4% over the year. And while overall take-up was down, the value of annuity sales was up, with the average pot size topping £80,000 (reaching around £84,000) for the first time. This suggests increased annuity interest among those with higher wealth. But an annuity is just one option.
Keep reading for a look at all the pension options available to you and how you might use an annuity to provide an element of stability in turbulent times.
An annuity provides a guaranteed income for life
An annuity is arguably the “traditional” retirement option. You use your accumulated defined contribution wealth to purchase a guaranteed income for life. You can usually take up to 25% of your fund as tax-free cash, with the rest taxed as income.
You can specify the frequency of payments and any “extras” such as a pension that continues to pay to your spouse on death, or payments that rise each year to help combat inflation.
MoneyWeek confirms a growing demand for the latter (known as “escalating annuities”), with sales in 2025 up 10% from the previous year, reaching their highest level in more than a decade.
Once an annuity is in place, its basis can’t usually be changed, and in that regard, it is inflexible. It does, though, offer peace of mind and easy budgeting, as you know exactly the amount you will receive each year. In times of geopolitical turbulence and market volatility, this stability might be appealing. But there are other options to consider, too.
It’s worth remembering, too, that rising life expectancies mean that you may need to pay for a thirty- or even forty-year retirement. The guaranteed income from an annuity would be invaluable here.
3 other retirement options to consider as you approach retirement
1. Drawdown
With flexi-access drawdown, you can access your 25% lump sum and then make withdrawals from your pot as and when you need them.
Not only does this provide you with flexibility, but the unused funds remain invested, so continue to benefit from potential investment growth. Of course, your fund value could drop too.
2. One-off lump sum
If you have a large, one-off purchase planned for the early stages of your retirement, a one-off lump sum (or a series of lump sums) might be a good option. They can release significant capital in one go, but there will be tax implications to consider.
You’ll also need to think about your overall budget and remember that your retirement fund is intended to support you for the rest of your life. This might include later-life costs like care. And you might plan to leave a legacy, too.
3. A combination
Through working with Globe IFA, you’ll have an idea of what you want your retirement to look like and the costs involved. This should help you decide on the best option. You might even find that a combination of options works for you.
For example, improved annuity rates might provide a regular income perfect for paying known expenses like household bills, while a pot set aside to be accessed flexibly could help to cover emergency or luxury expenditure.
Lump sums can then be used to cover big-ticket items like holidays or house renovations, with peace of mind that your other outgoings are covered.
Get in touch
The choices you make at retirement can have far-reaching consequences, so you must get them right. That means being prepared and knowing exactly what your options are, as well as the type of retirement you want. We can help here, so get in touch.
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you manage your long-term financial plans.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.
