It's important that you consider the tax implications of each of the different options at retirement.
The different options give you a lot more flexibility in how you use your pension savings, but please remember that there are tax implications regardless of the decisions you make. There are two main points to note:
The first 25% of any cash lump sum you take will be tax-free. The remaining amount will be taxed at your highest rate of income tax. When this is combined with your other sources of income it could push you into a higher tax bracket.
Your Annual Allowance (AA)
The standard Annual Allowance is currently £40,000, however if you take your benefits flexibly, including taking the whole account as a one-off lump sum, your AA will reduce to £4,000, which will reduce the amount that you can save into a DC pension going forward. This is important to be aware of if you plan to continue working.
For more information on taxation that may affect you please see the Taxation section.
The AA and MPAA quoted on this page are correct for the 2020/21 tax year.