Taking my pension after my retirement date
If you do decide to build up your pension savings further, you can add up £40,000 or 100% of your taxable salary, whichever is lower, each year until you’re 75. Maybe you enjoy working and want to carry on? It could be you want to build up more money in your pension savings. You might already have enough income to live on, say from other investments or savings.
So, what are the options and implications of delaying your retirement?
£40,000 tax-free annually
If you do decide to build up your pension savings further, you can add up to £40,000 each year until you’re 75. Your pension savings will also continue to benefit from tax-friendly investment. With more money in your pension savings and accessing it later in life, you could have more to look forward to in your retirement.
Depending on your pension, you may be able to retire gradually by drawing part of your pension. Alternatively, you could reduce your hours to part-time or work flexibly. Whatever happens, you’ll need to check whether your provider will allow you to if you want your pension savings to remain invested after you hit 75. Look to transferring your pension to a different provider if they don’t – do shop around though.
If leaving your pension savings untouched for longer sounds attractive, do watch out for any restrictions or charges. Check to see whether any potential growth might be wiped out by on-going investment charges. If the charges are too high in proportion to your savings, consider changing to a more efficient option.
Don’t lose out
Some pensions come with guarantees, such as a guaranteed income or fund value. It’s possible that delaying your retirement could result in you losing out on the guarantee. And remember, the value of your pension savings can rise and fall.
Did you know that pensions have a lifetime allowance? This is the total amount you can hold in your pension savings over your lifetime. This means that if the total of all your pensions goes over the current £1.03m Lifetime Allowance This is the total amount you can build up in pension plans over your lifetime while still benefiting from tax relief. The allowance is £1.03 million for the tax year 2018/19. If you save more than that limit, you’ll have to pay a tax charge known as the ‘Lifetime Allowance Charge’. This charge is only applied to the amount of pension savings that exceeds the Lifetime allowance. Currently the charge is 55% if you take your money as a lump sum, or 25% if you choose an income option. Bear in mind that you’ll have to pay income tax too on any income or lump sums taken from your pension(s) that fall outside of the 25% tax-free money. (2018/2019) you - or your loved ones if you die - will be hit with extra tax charges.
Get guidance or advice
When to retire, or when not to, is a major decision, so do get guidance or advice before doing anything.
Pension Wise is a government sponsored scheme that offers free pension guidance appointments for people 50 or over. Visit www.pensionwise.gov.uk or call 0800 138 3944.
Unbiased.co.uk can link you up you with a local FCA-approved independent financial adviser. Visit www.unbiased.co.uk.