Pension Advice Leeds

Annuity Advice Leeds

Pension Advice Leeds

Taking your whole pension pot as cash

Once you reach the age of 55, under the new rules introduced in April 2015, you are now able to take the whole of your pension pot as cash – in one go if you wish.

Before doing this, make sure that you get expert advice as you could end up with a very large tax bill and run out of money in retirement.

How do I take my whole pension pot as cash?

Simply close your current pension pot and withdraw all of the cash. Remember only the first quarter (25%) will be tax-free – the remaining three quarters (75%) will need to be added to the rest of your income and therefore taxed in the normal way.

What should I be thinking about?

Choosing to withdraw your pension pot will not provide you, your spouse or any other dependants a regular income after you die.

Seventy-five percent (three quarters) of the amount withdrawn will be a taxable income, increasing your tax rate once the money is added to your other income/funds.

Once you have chosen to withdraw the full pension pot there’s no turning back and you cannot change your mind.

For most of us, it would be more tax efficient to consider one of the other options available (Guaranteed Income, Flexible Income, Cash Lump Sums)

Taking the lump sum could reduce your entitlement to any benefits that you have or as you grow older.

Amount of tax you will pay

It is very important that 75% of the amount you withdraw will count as taxable income.

Whether you need to pay tax will depend on how much you have saved in your pension pot, when added to your other income (and other savings) it will probably increase your current tax rate.

You will be paid the cash by your pension scheme or provider through a payslip and tax will be taken off in advance (PAYE – pay as you earn) – this means that you could be paying too much Income Tax and have to claim the money back at a later date OR you might owe more tax, this will depend on your other sources of income.

There is a lifetime limit allowance (currently £1,030,000) and you may need to pay extra tax charges or restrictions should your pension savings exceed this, or if you reach the age of 75 and have less lifetime allowance available than the value of the pension pot you want to cash.

Tax relief on future pension savings

Once you begin taking income, if the value of your pension pot is £10,000 or more the amount of defined contribution pension savings in which you can get tax relief on each year will be reduced from the ‘annual allowance’ (£40,000) to a lower amount of £4,000 (MPAA – Money Purchase Annual Allowance) – as of 2018/2019.

What would happen after I die?

Any investments or remaining cash that was taken from your pension pot will count as part of your estate or Inheritance Tax (IHT).

Any part of your pot not used would normally not be liable for IHT and should you die before reaching the age of 75 will pass tax-free to your beneficiaries, provided the money is paid within 2 years of the provider becoming aware of the death.

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Since the changes introduced in April 2015, you now have a much greater choice and flexibility over how and when you may take money from your pension pot.

Our helpful advisors will talk you through the options available, giving you advice and time to understand the choices available.

Taking your pension from April 2015

If you’re over 55 and have a pension based on how much has been paid into your pot, the changes made in April 2015 give you the freedom over how you can use your pension pot.

You can now tailor when and how you use your pension – whether you plan on retiring early, cutting back your hours gradually or carry on working for longer, you now have the power over your pension pot to fit in with your particular retirement journey.

To make sure you have the right option/combination that will provide you and any dependants with a reliable and tax-efficient income throughout your retirement, our expert advisors will guide you through the entire process.

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Guaranteed income

Annuities can provide you with a guaranteed income payable for either the rest of your life or a fixed number of years.

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Cash Lump sums

When you draw benefits from your pension scheme, you can normally receive some of the benefit as a tax-free cash lump sum.

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Flexible Income

With this option you can normally take up to 25% (a quarter) of your pension pot or of the amount you allocate for flexible drawdown

Find Out More


Since the new flexible rules (April 2015) came to affect you can mix and match a variety of different options for your pension pot, using separate or combined pots.

Leave your pension pot untouched

Use your pot to buy a guaranteed income for life – an annuity

Use your pot to provide a flexible retirement income – flexi-access drawdown

Take your whole pot as cash

Mixing your options

When deciding how to access your pension, you don’t have to choose one option – you can mix and match as you like.

Another option is to keep saving into your pension and get a tax relief up to the age of 75.

The right option for you will depend on:

  • Your age and health
  • When you stop or reduce your work
  • Whether you have financial dependents
  • Your income objectives and attitude to risk
  • The size of your pension pot and other savings
  • Whether your circumstances are likely to change in the future
  • Any pension or other savings your spouse or partner has, if relevant

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