Another option when you purchase your annuity is to take a portion of your pension pot (usually up to 25%) as a tax-free lump sum. Bear in mind, however, that any cash you take from your pension will reduce the amount you have left to buy an annuity with. This would mean a lower income in retirement. The decision to take tax-free cash will be based on your circumstances and objectives. You may wish to pay off a debt, gift money to family, make home improvements, take a holiday or spend a lump sum on something else. If you are in any doubt over whether to withdraw some of this cash, you should seek professional advice.