Taking cash from my pension

You’ll have the freedom to take cash from your pension pot whenever you want, from age 55 (57 from 2028). Take some or take it all – the choice is yours.

Why could taking cash from my pension be a good thing?

Here are some of the advantages of taking cash from your pot:

Take tax-free cash – The first 25% you take as cash is normally tax-free. You’ll pay income tax on the rest.

Stay flexible – You can keep your options open

  • Dip in to your savings anytime and as often as you like from age 55 (57 from 2028)
  • Convert to a fixed income when it suits you using your remaining pot
  • Take a flexible income at any time

Support family – When you die, any pot which remains can be passed on. Who receives it is at the discretion of Standard Life. You can let Standard Life know who you would like it to be paid to by completing an expression of wish form. As Standard Life decides who receives the pot, it is normally paid out inheritance-tax free

  • If you die before age 75, payments out will normally be income tax-free.
  • If you die after age 75, payments out will normally be charged income tax at the beneficiary's marginal rate.

Stay invested – Your remaining pot will stay invested, giving potential for future investment growth which can help your income last longer, but this also means the value of your pension could fall as growth isn’t guaranteed. Taking cash isn’t suitable for everyone.

What do I need to think about?

Do you need the money now?

It’s a good idea to only take cash if you need it. Any money removed from your pot won’t have the same tax advantages. If you have money in other investments you could consider using that first. The more you take now, the less you’ll have in the future.

Be careful your withdrawal doesn’t take you into the next tax band

Once you go over your tax-free cash limit you’ll pay income tax on the rest. You could end up paying more if your withdrawal added to any other income in that tax year takes you into a higher rate tax band. You may pay less tax if you spread out your cash withdrawals and keep below higher rate bands.

Payments into any pension could be restricted

Taking out more than your tax-free cash limit can restrict the future payments you or an employer can make to any of your pensions - known as your annual allowance.

Under new Government rules, when you flexibly access your pension savings your annual allowance becomes £4,000 for any ‘money purchase arrangement’. This pension plan is an example of a money purchase arrangement.

When you flexibly access, you will get a notification from your pension provider which will explain more about the new limit and what you need to do.

State benefits

Your entitlement to means-tested state benefits, if applicable, may be affected if you take cash or income from your pension – check this isn’t going to be a problem before going ahead.

Find out more (PDF, 190KB)

 

Flexible income

Flexible income, or drawdown, gives you the freedom to choose your own level of income and the flexibility to suit your personal needs.

 

Fixed income

Fixed income, or an annuity, is a guaranteed income for life. It’s easy to set up with no fuss after that.

 

Why leave it for now?

You don’t have to take money out of your pension straight away. You could benefit from leaving your money where it is.

To sum up

Tax-free cash The first 25% you take as cash is normally tax-free. Income tax Once you go over your tax-free cash limit you’ll pay income tax on the rest.
Flexibility Dip in to your savings anytime from age 55 (57 from 2028) onwards or take a flexible income with your remaining pot or convert to a fixed income. Payments into any pension could be restricted Once you go over your tax-free cash limit this normally restricts the payments you or an employer can make to any of your pensions.
Support family Pass on your remaining pot, normally inheritance tax free when you die. No guarantees You could run out of money if you withdraw too much or you live longer than expected. The more you take now the less you’ll have in the future.
Stay invested Your remaining pot will stay invested, giving potential for future investment growth. This also means the value of your pot could fall.    

Tax rules and legislation can change. Any information given is based on our understanding of law and current HM Revenue & Customs practice, as at April 2017. Your personal circumstances also have an impact on tax treatment.

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.

 Are you approaching retirement?

We recommend you seek appropriate guidance or advice to understand your options at retirement. If you don’t already have an adviser, we’re here to help. You will have access to the Government’s free impartial guidance service – Pension Wise – provided through Citizens Advice or The Pensions Advisory Service. Their contact details can be found on the Contact us pages in the links provided. This guidance can be accessed on the internet, by telephone or face to face.