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If your pension plan has the option of income drawdown, you will be able to take your tax-free cash from the age of 55 and leave the rest invested; otherwise you may need to transfer your plan into a pension that allows this. Check with your pension provider if you're unsure. The minimum age may be subject to change. For more information about the investment options available to you if you decide to do this, read our guide 'Choosing investment options in retirement' (121KB).
Yes, you can take tax-free cash and continue contributing, if the plan allows it.
However, if you take more than your tax-free cash, the amount that you can pay in without a tax charge may reduce.
If you are looking for more help regarding tax then read our Tax in Retirement Guide.
Taking more than just tax-free cash can trigger the money purchase annual allowance (MPAA), which reduces the amount that can be paid to defined contribution schemes, without tax charges from £40,000 to £4,000 per tax year. However, it's only contributions made after the trigger event that are tested against the reduced MPAA - it's not back-dated to the start of the tax year. All contributions (both before and after the trigger event) still count towards the overall annual allowance of £40,000.
No, the entitlement to 25% tax-free cash is only available to the original plan holder.
However, if you die before age 75, any lump sum or pension payment your beneficiaries receive will normally be tax-free, provided the lifetime allowance is not exceeded.
If you die after reaching age 75, any lump sum or pension payments received will be subject to income tax at the beneficiary’s marginal rate of tax.
Choosing a beneficiary lets your pension provider know who you want your pension to go to and they can take this into consideration. If you’ve not chosen a beneficiary you can do so by logging in .
Each pension plan has its own tax-free cash entitlement so normally you could get 25% tax-free cash from each pension plan.
The amount of tax-free cash allowed is normally 25% of the value of the pot being accessed to provide benefits.
So if taking your tax-free cash in stages, the amount still available normally increases (or decreases) in line with the value of the remaining pension pot.
You can usually combine other pensions with your Standard Life pension. This could make it easier to manage your money. However, it’s important to check with your other providers that you won’t lose any valuable benefits or guarantees, as this might not be right for everyone. You can find out more on our Transfer your Pension page.
Standard Life will not charge you to transfer other pensions in. However, if you receive advice from a financial adviser, there will likely be a fee involved. You should also check with your current provider to see if any charges or penalties will be applied on transfer, or if any valuable guarantees or other benefits could be lost.
Normally you can take your pension from age 55 (may be subject to change); however there are some situations where benefits can be paid before 55.
Standard Life offers all the options and full flexibility at retirement. Whichever option you choose, you can normally take up to 25% of your pension pot as tax-free cash and choose to take it as one lump sum or as you need it, over a period of time. Any money taken over your tax-free cash will be subject to income tax.
Depending on the type of pension you have, you may need to transfer to a product that allows access to these options.
For more information about your options at retirement visit our Retirement Hub online.
Guaranteed income: This option allows you to take your tax-free cash and be paid a guaranteed fixed income for the rest of your life. You choose how you want to set up the annuity and what you want to happen when you die. How much you get as an income depends upon a number of factors including the options you chose and also your age, health and lifestyle. Once the annuity has been set up it is payable for the rest of your life and cannot be changed. You no longer have access to a pot that you can withdraw from but you know the income will continue until you die.
Flexible Income: This option allows you to take some or all of your tax-free cash and leave the rest of the money invested. It gives you the flexibility to take lump sums or regular income whenever you need it. The remaining money will continue to be invested so there are no guarantees and the value of the pot can go down as well as up. You could even run out of money, but you will have the flexibility to take what you want, when you want, until the pot runs out. Any money left in the pot on death can pass on to your family or friends. You still have the option to switch to a guaranteed income at any time.
For both options it is a good idea to shop around other providers to find the deal that’s right for you.
|Compare and Contrast:||Flexible||Guaranteed|
|Pension pot passed on to my family when I die|
|Guaranteed whatever happens to the stock market|
|Can change my income any time I like|
|Guaranteed to last as long as I live|
No, you don’t need to get financial advice when taking your pension. However, if you’re unsure what’s right for you we would suggest speaking to a financial adviser.
Tax is deducted at source under Pay As You Earn (PAYE), before it reaches your bank account. Sometimes an emergency tax code is used initially which can result in an overpayment of tax. Where this happens, you may have to reclaim any overpaid tax.
If you have a pension with Standard Life you can review where your money is invested by logging in .
To help you review your pension, we have a number of online tools. Create a vision of your ideal retirement and get an understanding of how much you might need with our Retirement Tool or calculate how much you might get with our Pension Calculator.
You may be able to choose the same funds you are currently invested in. It’s always a good idea to regularly review your investments to make sure they remain on track and continue to meet your changing needs. For more information on the investment options available if you choose to leave your money invested and take a flexible income, read our guide 'Choosing investment options in retirement' (121KB).
The investment options available depend on the type of plan you have. Most plans will give you access to a range of funds covering different types of investments, regions and investment styles. Our guide 'Choosing investment options in retirement' (121KB) gives more information on your options if you decide to keep your money invested in retirement.
We have an independent Risk Questionnaire that can help you understand how much risk you’re comfortable taking with your investment. We give all the funds in our pension plans a risk rating, called a ‘volatility rating’. Typically funds with higher volatility ratings have greater potential for higher investment returns over the long run. But they’re also more likely to suddenly fall or rise in value.
We also have a range of funds called MyFolio Managed Funds. These let you choose the most appropriate one for you from one of five risk levels – I (lower risk) to V (higher risk). You can find out more about these and other investment options in our 'Choosing investment options in retirement' (121KB) guide.
Our online Lifetime Allowance Guide will give you a full understanding of what the LTA is and what it could mean for you.
When benefits in excess of the LTA are taken, there’s a tax charge:
No, if you are only taking tax-free cash, the annual allowance is unaffected.
If you subsequently start to take income from the drawdown fund, the £4,000 money purchase annual allowance would be triggered at that point.
Yes, you can carry forward unused annual allowance from the previous three tax years if the current year's annual allowance has been fully used up.
But it’s only possible to carry forward from years in which you’ve been a member of a registered pension plan at some point during that tax year. There's no need for any contributions to have been made to the plan in that year.
It’s not possible to use carry forward if the money purchase annual allowance has been triggered – unless carrying forward into a defined benefit scheme.
If paying the contribution personally, you need to have the earnings in the tax year to support the payment as tax relief is limited to 100% of your relevant UK earnings.
State pensions do not count towards the lifetime allowance (LTA).
Final salary schemes are tested against the LTA. The value of the benefits for this purpose is 20 x the yearly pension, plus the amount of any tax-free cash taken.
Most pension providers only take pension contributions that receive tax relief - the maximum contribution an individual can get tax relief on in a tax year is the higher of 100% of their UK earnings or £3,600.
But you also need to consider the annual allowance, which is the maximum that can be paid in total to your pension plans before a tax charge applies. If your annual allowance (plus any unused allowance carried forward from earlier years) is exceeded, there’s a tax charge on the excess. Remember, any contributions made by your employer or a third party also count towards your annual allowance.
Taking more than just tax free cash from your pension can trigger the money purchase annual allowance (MPAA) – see the earlier question about taking more than just tax-free cash for more details.
If you’re still looking for more answers then please contact us via our secure messaging service where our retirement experts can help you.