Leaving your pension to grow

If you can afford to leave your pension invested you could get a higher retirement income, especially if you’re still working and contributing.

From age 55, you can access your full pension savings, but before you do you should consider all your options.

Your pension is the most tax efficient way to save, with every contribution normally benefitting from the top up of tax relief.

Your money then stays invested, giving your pot the potential to keep on growing.

Remember it has to last as long as you need it to, so it may be best to look at using other savings first.

What do I need to think about?

You may need to carry on working for longer if you leave your pension invested.

Make sure you’re in the right investment mix as you approach retirement, there’s always the chance of your investments performing poorly and the value of your pot significantly falling.

Take a look at our Why leave it for now? guide to find out more.

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Is leaving my pension for now right for me?

If you have another source of income or want to support others after you’re gone then leaving your pension invested could be the right choice for you.

Leaving your pension for now lets you:

  • Stay flexible
    You can keep your options open. If you don’t need the money now you can leave your pot invested and take it later.
  • Top-up your pension pot
    By continuing to pay contributions into your pension you’ll get tax relief on any payment you make and if you’re 55 or over (57 from 2028) you’ll be able to access your money any time.
  • Stay invested
    Your pot will have the opportunity to grow. You could benefit from potential future, tax-efficient growth. This 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 older, your beneficiaries will be able to access the pension flexibly, at any age, subject to income tax.

What do I need to think about?

  • You’ll need another source of income
    If you choose to defer your pension, you’ll need to carry on working or have other sources of income. You won’t be able to enjoy your income in retirement straight away.
  • Your income isn’t guaranteed
    You run the risk of investments performing poorly and your pot falling in value, it could be worth less than was invested.
  • Shop around
    It's important that you shop around to find the best deal for you. Your pension provider may not offer the option you want or other providers may be able to offer you a better deal. So it's worth comparing what each provider can offer. Find out more about shopping around.

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 2018.

The information provided here should not be regarded as financial advice. If you are 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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