Take a cash lump sum

• Have it all in one go or spread it out to suit you

You can take all your pension savings in one lump sum – or spread it out over a series of smaller cash payments.

• Enjoy some tax-free cash

Usually, the first 25% of any cash payment will be paid tax-free while the rest will be taxed as income. 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 pension savings in one go, you can always explore another retirement income option.

• Your pension savings aren’t guaranteed to last forever

If you need your pension savings to live on, you need to think carefully about how you’ll make your money last.

• You could pay more in tax

Taking large sums of money from your pension savings can push you into a higher tax bracket – meaning you’ll hand over more of your hard-earned savings to the government.

• You can’t change your mind

Once you’ve taken a cash payment from your plan, you can’t usually change your mind - even if your circumstances change.

• You could be exposed to investment risk

When you leave money in your plan, there are no guarantees it will grow. Indeed, if your investments perform poorly, you could get back less than you started with.

• 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 £10,000 a year.

• Your entitlement to state benefits could be affected

The amount of cash you take from your pension savings could affect your entitlement to means-tested state benefits, this includes such things as housing benefits and council tax reductions.

• You should also remember that tax rules depend on your individual circumstances and may change in the future.

If you have money left in your plan when you die, it can be passed on to your loved ones – usually free from inheritance tax.

• If you die before age 75, your pension savings can be paid to your loved ones however they like, income tax free. If you have more than £1,073,100 then your loved ones will have to pay income tax on the part above this amount if they take it all out in one payment.
• If you die aged 75 or older, your pension savings can be paid to your loved ones however they like. Income tax will be due on the full amount.