Taking it all as cash
You can take your retirement savings as a cash payment.
What are my cash payment options?
- Have it all in one go or spread it out to suit you
You can take all your retirement savings in one lump sum – or spread it out over a series of smaller cash payments.
- Enjoy some tax-free cash
Usually, the first quarter of any cash payment will be paid tax-free. You may be entitled to a bigger tax-free allowance if you’ve previously secured one with HM Revenue & Customs.
- Give your savings more time to grow
Whatever you leave in your plan will stay invested – meaning it still has the chance to grow.
- Keep your options open
Providing you don’t take all your savings in one go, you can always explore another retirement income option.
What do I need to watch out for?
- Your savings aren’t guaranteed to last forever
If you need your savings to live on, you need to think carefully about how you’ll make your money last. Because once it’s gone, it’s gone for good.
- You could pay more in tax
Taking large sums of money from your retirement savings can push you into a higher tax bracket – meaning you’ll hand over more of your hard-earned savings straight to the taxman.
- You can’t change your mind
Once you’ve taken a cash payment from your plan, you can’t usually put it back in again.
- You could be exposed to investment risk
If you choose to leave some of your savings in your plan, they’ll remain invested. And while this means they can continue to grow, it also means they can fall in value – meaning you’d have less money to live on.
- Saving into other pension plans could be restricted
When you start taking cash from your plan, the government puts a limit on how much you (and your employer) can save into other money purchase pension arrangements without a tax charge. This is called the Money Purchase Annual Allowance – and it’s currently set at £4,000 a year.
- Your entitlement to state benefits could be affected
The amount of cash you take from your retirement savings could affect your entitlement to means-tested state benefits, this includes such things as housing benefits and council tax reductions.
What happens when I die?
If you have money left in your plan when you die, it can be passed on to your loved ones – usually free of inheritance tax.
- If you die before age 75, your retirement savings can be paid to your loved ones how they like, income tax-free.
- If you die aged 75 or older, your retirement savings can be paid to your loved ones how they like, subject to tax.
Want to explore taking an income?
|Your options||Secure income||Flexible access||Take cash|
|Can I arrange to take a regular income?||Yes||Yes||No|
|Is my income guaranteed for the rest of my life?||Yes||No||No|
|Can I change how much money I receive?||No||Yes||Yes|
|Could my money run out later in retirement?||No||Yes||Yes|
|Can I do something different with my savings in later years?||No||Yes||Yes|
|Can I take some tax-free cash?||Usually up to 25% of your pension pot*||Usually up to 25% of your pension pot*||Usually up to 25% of your pension pot*|
|Find out more||
*You may be able to take more than 25% if you have protected tax-free cash. A financial adviser could help you understand whether this applies to you.
Other useful information
- How will my retirement income be taxed?
- What are my tax-free allowances?
- What will the State Pension provide?