You’ve worked hard and have put some of the money you’ve earned into your retirement savings – now is the time to make decisions to enable you to enjoy the next chapter of your life.
You’re ready to think about taking your money, so it’s time for a reality check to make sure your savings will provide the lifestyle you’ve planned for.
You need to start thinking about the options available to you at retirement.
As you approach retirement, you should start to think about how you want to retire and when.
Perhaps you want to save more, or perhaps you want to access your savings later, it’s up to you.
With most schemes you have the flexibility to choose your retirement age, you can increase this age throughout your journey if you feel your savings aren’t on track – remember your selected retirement age must be 55 or over (or 57 from April 2028)
When you are approaching retirement or your selected retirement age, you should be starting to think about the different ways you can take your money, and how these fit with your plans.
You can start to develop your own personal targets based on your individual circumstances and aspirations.
You should start to think about what kind of lifestyle you could have in retirement depending on your salary, household, and retirement savings.
So, like our state pensions, will we receive our money every month?
Yes, that is one way but there is more flexibility than a state pension when accessing your retirement savings from your workplace pension, there are four main options for taking your money, you can:
Take a flexible income (Flexi-Access Drawdown allows you to select some or all of your pension pot and take a maximum of 25% of the amount as a tax-free cash sum, while the remainder stays invested), from which you can take a taxable income).
Take it all in one go.
Take it in a series of cash lump sums.
Get a guaranteed income.
You could choose more than one option and you should also shop around to find the best provider for your needs.
Be aware some of our schemes do not offer all of these options – please read your member booklet (usually found in the ‘document library’ of your scheme website) for more details.
Will the savings in our pension pot be taxed?
Yes, you can usually take 25% of your pot tax free but the remainder could be subject to income tax.
These options and tax implications are explained in the ‘your options for taking your money’ section of your scheme website.
You can also visit Money Helper here www.moneyhelper.org.uk.
Say I needed access to some of my retirement savings for an emergency purchase or to pay bills (but do not formally want to retire) can I still pay into my pension after?
Yes, you can still pay into your pension after accessing your retirement savings (which you can ordinarily do from age 55, but earlier in cases of ill health), but you need to be aware of the money purchase annual allowance (MPAA)
This limits how much that you can continue to pay into a pension.
Once you access your pot it will reduce the amount that can be paid in on a tax-free basis each year. You can get all the latest pension limits at moneyhelper.org.uk.
How is the MPAA triggered?
Generally, once you start to take an income from a defined contribution pension in the form of a taxable lump sum or if you take flexible income after you’ve taken the 25% tax free cash excluding small pension pots.
These are important decisions, so start thinking now. Get ready for retirement, review your options, and make a plan that’s right for you.
If you are less than 10 years away from retiring and want more information to help you, go to the retirement section of your scheme website.
For help understanding the choices available to you, visit Pension Wise, a government service from Money Helper that offers free, impartial guidance about your defined contribution pension options. You can book an appointment once you are aged 50 or over.
You may wish to take financial advice, visit unbiased.co.uk to find a financial adviser (be aware they usually charge for their services).
