Why leave it for now?

If you can afford to leave your pension invested, while not guaranteed, it is more likely to lead to a higher retirement income, especially if you’re still working and contributing.

Why could leaving it for now be a good thing?

If you have another source of income or want to support others after you’re gone then leaving your pension invested could be the right choice for you. Leaving your pension invested offers a range of possibilities and we’ll help you understand your options. Here are some of the advantages of leaving it for now:

Stay flexible – You can keep your options open. If you don’t need the money now you can leave your pot invested and take it later.

Top-up your pension pot – By continuing to pay into your pension. You’ll get tax benefits on any payment you make and if you’re 55 (may be subject to change) or over you’ll be able to access your money any time.

Support family – When you die, any pot that 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 decide who receives the pot, it is normally paid free of inheritance tax.

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

Stay invested – Your pension pot will have the opportunity to grow. You could benefit from potential future, tax-efficient growth. This isn’t guaranteed.

The value of your investment can go down as well as up and may be worth less than what was paid in.

What do I need to think about?

Another source of income – If you choose to defer your pension, you’ll need to carry on working or have other sources of income. You won’t be able to enjoy your retirement income straight away.

No guarantees – If you choose to keep your money invested, you need to remember that your investments may not perform as well as you expect them to – they can go down as well as up in value. Charges continue to be deducted and could reduce your pot. You could get back less.

 

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.

 

Take cash from your pension

Withdraw cash lump sums from your pension whenever you like. The first 25% is normally tax-free.

To sum up

Flexibility Keep your options open – if you don’t need the money now you can leave your pension pot invested and take it later. Risk of pension falling in value
You need to remember that your investments may not perform as well as you expect them to – they can go down as well as up in value. Charges continue to be deducted and could reduce your pot.
Support family Pass on your pot, normally inheritance tax free, when you die.    
Stay invested You could benefit from potential future, tax-efficient growth.    
Top-up your pension pot By continuing to pay into your pension.    

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 2018. Your own 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?

Access to impartial guidance

We recommend you seek appropriate guidance or advice to understand your options at retirement. You can get free guidance over the phone or face to face with Pensionwise.

Go to www.pensionwise.gov.uk or call 0800 138 3944.

The Money Advice Service (MAS) guide is also available on the Pensionwise site.