Tax implications

It's important you consider the tax implications of each of the different options at retirement.

The different options give you a lot more flexibility in how you use your pension savings, but please remember there are tax implications regardless of the decisions you make. There are two main points to note:

Taking cash

The first 25% of any cash lump sum you take will be tax-free. The remaining amount will be taxed at your highest rate of income tax. When this is combined with your other sources of income it could push you into a higher tax bracket.

Your Annual Allowance

The standard Annual Allowance (AA) is currently £60,000. However, if you take your benefits flexibly (including taking the whole account as a one-off lump sum) your AA will reduce to £10,000, which will reduce the amount you can save into a DC pension going forward. This is important to be aware of if you plan to continue working.

For more information on taxation that may affect you please see the Taxation section.