Pension or Lump Sum? How to Choose at Retirement
Compare lifelong annuities with capital withdrawals: taxes, risk, flexibility and deadlines.
6 min read · Retirement & Pensions
When you retire you often must decide whether to take your pension fund as an annuity, a lump sum or a mix. The decision is almost impossible to reverse.
The annuity
An annuity is paid for life and often includes a survivor pension for your partner. It is taxed as ordinary income every year. The conversion rate decides its size; many funds apply low rates on the extra-mandatory part, which can make the annuity look unattractive.
Example with default values. Open the calculator →
The lump sum
Capital is taxed once at a reduced rate and then belongs to you. It gives flexibility and can be inherited, but you carry investment and longevity risk. Staggering withdrawals over several years usually lowers the tax because rates rise with the amount.
Questions to ask
- Will my AHV pension and annuities cover my fixed costs?
- How long might I live? Plan for 90+ years.
- How much does my partner receive if I die first?
- What is the deadline to announce a capital withdrawal (often 3–12 months before retirement)?
Mixed solutions
Many people take an annuity for the mandatory part and the lump sum for the rest, covering essentials with guaranteed income and keeping flexibility for the rest. Married people need spousal consent for capital withdrawals.
Test the numbers with the conversion rate calculator and the retirement gap calculator.