Taking cash from your pension

Withdraw cash from your pension whenever you want, from age 55. Take some or take it all – the choice is yours.

Taking cash from my pension

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Taking cash lets you:

  • Stay flexible
    You can keep your options open
    • Dip in to your savings anytime and as often as you like from age 55 (57 from 2028)
    • Convert to a fixed income when it suits you using your remaining pot
    • Take a flexible income at any time
  • Take tax-free cash
    The first 25% you take as cash is normally tax-free. You’ll pay income tax on the rest.
  • Stay invested
    Your remaining pot will stay invested, giving potential for future investment growth which can help your income last longer, but this also means the value of your pension could fall as growth isn’t guaranteed.
  • Support family
    You can pass on your remaining pot to anyone you choose, normally free of inheritance tax.
    • If you die before age 75, this will normally be completely tax free.
    • If you die after age 75 or over, they will be able to access the pension flexibly, at any age, subject to income tax.

What do I need to think about?

  • Do you need the money now?
    It’s a good idea to only take cash if you need it. Any money removed from your pot won’t have the same tax advantages so if you have money in other investments you could consider using that first. The more you take now, the less you’ll have in the future.
  • Watch your withdrawal doesn’t take you into the next tax band
    Once you go over your tax-free cash limit you’ll pay income tax on the rest. You could end up paying more if your withdrawal added to any other income in that tax year takes you into a higher rate tax band. You may pay less tax if you spread out your cash withdrawals and keep below higher rate bands.
  • Payments into any money purchase pension could be restricted
    Taking out more than your tax-free cash limit (when you start accessing taxable income) restricts the payments you or an employer can make to any of your money purchase pensions to £4,000 a year. This can be a problem if you’re still earning and either have other savings you want to pay into a pension or if you intend to make significant payments into any of your pensions.
  • State benefits
    Your entitlement to means-tested state benefits, if applicable, may be affected if you take cash or income from your pension – check this isn’t going to be a problem before going ahead.

Tax rules and legislation can change and your tax treatment will depend on your personal circumstances. Any information given is based on our understanding of law and current HM Revenue & Customs practice, as at April 2017.

The information provided here should not be regarded as financial advice. If you’re unsure you should speak to a financial adviser. There’s likely to be a cost for this.

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Access to impartial guidance

We recommend you seek appropriate guidance or advice before you make any decisions. An adviser may charge a fee for this. You can also get free impartial guidance over the phone or face to face with Pensionwise. Go to pensionwise.gov.uk or call 0800 138 3944. Make sure you understand all your retirement options by reading the Money Advice Service guide – Your pension - it’s time to choose

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