Its always difficult to advise on the best way forward with pension pots. Every person has different needs at different times of their lives.
To give you an example - me:
I took ill health reitrement at 50 and got various options with my company pension. The rules had changed and I got offered a lump sum of about £66,000 which was very tempting and my 'advisers' head told me to take it and invest it. However my real life experience of people who had done this made me realise it wasnt for me. Many of them had either dipped into their lump sum or seen their investments lose money.
I was also offered the option of taking 66% of the basic State Pension with the proviso that they would take back 100% of the basic sate pension when I started receiving it (now a year later than it was back then).
So the options made me think. I took advice for my work mates and every one of them advised me to take the lump sum (all qualified advisers).
In the end I went for the maximum pension plus the 66% of my state pension (basing that bit on the fact that I might not live to retirement age and also the fact that the money would be more useful whilst we were young enough to enjoy it).
Anyway - 10 years on I don't regret it one bit. I now have a pension that has grown pretty well through the RPI indexing it comes with and when I eventually receive my State Pension I know I will lose the basic part but will still have a small increase due to any SERPS or additional pension I have paid in.
Now to my latest problem. I got made redundant the other week and decided that as I'm coming up to 60 it might be a good time to retire fully. I'm in the postion of having a personal pension worth around £50K and what I think what's right for me now is to leave it until next year and then start drawing from it (up to my tax free allowance). This should virtually replace my part-time wages until I reach retirement.
I looked at annuities and they will just not pay enough. If I want them to increase they will start much lower and basically at least 50% of it will die with me (if i set it up that way).
So it really is horses for courses and what your gut feeling is regarding taking lump sums, annuties or whatever.
Good luck making your decision.
ps - Colwyn - I'm not 100% certain but I'm pretty sure even with the new rules you cannot take the whole of the fund tax free. I'm sure someone will confirm that for me