The savings system has never been more flexible but planning how you use your retirement pots is crucial to making the most of them.
Given how hard you will have worked for it, it makes sense to squeeze the most out of your retirement fund.
These days, that means maximising the benefits of the regime for tax-free savings. Like pensions, ISAs - or Individual Savings Accounts - come with tax advantages that the government offers to encourage us to save.
Each of us is allowed to save £20,000 a year into an ISA and the money can then grow without any tax on capital gains applying. If money is being earmarked for retirement, and will therefore have many years or even decades to grow, this can amount to a significant tax saving.
Crucially, ISAs also allow you to take an income without paying tax on it, making them an invaluable extra tool for those in retirement, when the time comes to putting those savings into use.
Unlike pensions - where money benefits from tax relief when it is paid in but then taxed when it is withdrawn - ISA contributions are made from money that has already been taxed, with nothing to pay when it is withdrawn.
Having access to both pension and ISA savings means you will have the flexibility to manage your income in the most tax-efficient way.
Turning savings into an income
Retirement is often the first time that individuals think about how they turn their savings into an income stream.
There can be a temptation to shield money from investment losses by using cash savings accounts, and simply chipping away at the capital. This risks the value of your money being eroded by inflation, while offering no chance of investment gains.
Equity income funds have often been the place where those living from savings in retirement have looked instead. These funds invest in shares, so are exposed to stock market ups and downs, but this of course means they can make gains if their underlying investments rise.
They are overseen by a fund manager with the primary aim of producing sustainable income for their investors. Though performance is never guaranteed, they look for companies that pay a dividend that may be higher than the overall market average, but that is well supported by a financially strong company as well. The manager will then ensure so that those invested in the fund can take a regular income, which inside an ISA is tax-free.
If you stick to taking this dividend income only, and not anything from the underlying capital, it means stock markets can fall but you won’t have to cash in those losses, and can wait for prices to recover - a welcome reassurance when you’re living on a limited income in retirement.
The value of investments and income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. This information and our guidance service are not personal recommendations for any particular investment. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser. Tax treatment depends on individual circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55.
Combining your pensions into a Self-Invested Personal Pension (SIPP) can make it easier to manage your savings - and it could be cheaper, with lower fees than you’re currently paying.