Delaying taking your pension pot

Money Advice Service

If you already have enough income to live on – either because you are carrying on working or you have other income from savings or investments to live on – you might be able to delay accessing your pension pot beyond your selected retirement date, or your scheme’s normal retirement date.

How it works

There’s no hurry to start taking your pension if you don’t need to. But check whether restrictions apply or if you’ll lose income guarantees if you take it later.

Your pot continues to grow tax-free until you need it – potentially providing more income once you start taking money out.

If you want to build up your pension pot further you can continue to get tax relief on pension savings of up to £40,000 each year (tax year 2019-20), or 100% of your earnings if you earn less than £40,000, until age 75.

For more information see our guide Tax relief on pension contributions.

Things to think about

Be sure to check with your pension scheme or provider whether there are any restrictions or charges for changing your retirement date, and the process and deadline for telling them.

Also check that you won’t lose any income guarantees – for example, a guaranteed annuity rate (GAR) – by delaying your retirement date.

The value of pension pots can rise or fall. Remember to review where your pot is invested as you get closer to the time you want to retire and arrange to move it to less risky funds if necessary.

If you want to delay taking your pot but your scheme or provider doesn’t have this option, get guidance or advice and shop around before moving your pension.

The longer you delay, the higher your potential retirement income, however, this could affect your future tax – and your entitlement to benefits as you grow older, for example, long-term care costs.

Find out more about the effect of income and savings on benefits in our guide on tax relief on pension contributions and benefits in retirement.

You could instead delay taking some of your pension.

For example, you might be able to arrange to retire gradually, or change to working part-time or flexibly and then draw part of your pension.

If you want your pot to remain invested after the age of 75, you’ll need to check with your pension scheme or provider that they will allow this.

If not, you might need to transfer to another scheme or provider who will.

What happens when you die?

If you die before age 75: your untouched pension pots can pass tax-free to any nominated beneficiary provided the money is paid within two years of the provider becoming aware of your death. If the two-year limit is missed, the money will be added to the beneficiary’s other income and taxed at the appropriate rate(s).

If you die after 75: and your nominated beneficiary takes the money as income or as a lump sum payment, they’ll pay tax at their appropriate rate(s). This means that the money will be added to their income and taxed in the normal way.

Lifetime allowance charge for large pension pots

If the total value of all your pension savings when you die exceeds the lifetime allowance (currently £1,054,700), further tax charges will be payable by the beneficiary.

To find out more about the lifetime allowance see our guide Lifetime allowance for pension savings.

This article is provided by the Money Advice Service.

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Some important information about Rest Less Money

We want you to understand the positives, but also the limitations of using our site. We operate in a journalistic manner and therefore all information, guidance or suggestions provided are intended to be general in nature, and you should not rely on any of the information on the site in connection with the making of any financial decision.

When we set out to build Rest Less Money, we wanted to be a trusted place where you could find helpful information about financial matters affecting the over 50s. As a free to use resource, we try hard to provide the best information we can, but we cannot guarantee that we won’t occasionally make mistakes. So please note that you use the information on our site at your own risk, and we can’t accept liability if things go wrong.

Key things to remember when using Rest Less Money:

We do not offer financial advice – As a journalistic site, it’s important to know that we do not provide financial advice. You should always do your own research before choosing any financial product so that you can be certain it is right for you and your specific circumstances. If you are in any doubt, please seek professional financial advice from a regulated financial advisor.

No Liability – please note that you use the information on Rest Less Money at your own risk and we can’t accept liability for how you choose to use the information given on our site. We will often provide links to content or products and services available on other third-party websites. These are provided purely for your convenience and we cannot be held responsible for any content, or any of the products and services offered on any website that we link to.

 

Accuracy of Information – We try to make sure that all the information provided on Rest Less Money is correct at the time of publishing as we want it to be the most helpful resource possible. Sadly, we are not perfect however, and so we can make no guarantees as to the completeness, accuracy, adequacy or suitability of the information available on the site.
Whilst we work hard to try and provide accurate information, deals and prices can change, so whilst they may be correct at the time of writing, providers may subsequently decide to alter them later – so always double check first.

A final note on the Rest Less Community Forums – always remember that anyone can post their opinion on the Rest Less Community Forums, so it can be very different from our own opinion and may not be factual or well researched. Always be wary of any content posted on the forums and be sure to do your own research and due diligence on anything suggested. 

We hope you find Rest Less Money a useful resource and we would welcome your feedback at [email protected] on how to make it even better. For more information on any of the above you can read our full terms and conditions.

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