Our eleven key questions can help you decide whether or not taking all your pension in cash is the right choice for you.
You normally can’t take your pension pot before age 55, however you may be able to take it before this age if :
If either of the above applies to you please contact us for further details about how you can take your pension pot because this can’t be done online.Continue to question two
Should you decide to fully encash your pension, are you comfortable you can provide for any dependants you may have?Yes No Not sure Change answer
Once you fully encash your pension the decision cannot be reversed. If you are unsure about how you may provide for your dependants, we strongly recommend that you discuss it with a financial adviser first. Please note: you may be charged for advice provided by a financial adviser.Continue to question three
Are you aware that you may have valuable benefits on your policy such as a Guaranteed Annuity Rate which you may lose if you fully encash?Yes No Not sure Change answer
As cashing in your pension is an important and irreversible decision, you should make sure you understand if your pension has any valuable benefits you would be giving up such as a Guaranteed Annuity Rate. If you choose to cash in your pension you will lose your guarantee – so consider your needs carefully.
A Guaranteed Annuity Rate can significantly increase the amount of income you receive from your pension savings. To show the value of this guarantee we’ve provided an example.
Your retirement pack will tell you if you have a guaranteed annuity rate or you can contact us to find out. You should check if any conditions apply such as taking it on a certain date and if it can be taken on a joint life basis. If your plan has a guaranteed annuity rate, and you wish to take your pension as cash or transfer it, you may be required to take financial advice, for which you’ll probably be charged. This may also apply to some other guarantees.
Please note there might be other important features that apply to your policy. For further information on whether your policy has a guarantee please refer to your policy documentation or please contact us.Continue to question four
Have you used the free government guidance service called Pension Wise?Yes No Not sure Change answer
Pension Wise, the Government’s free impartial guidance service, has been specifically designed to help customers through the new pension landscape and to make the right choices around their retirement.
We would strongly recommend consulting Pension Wise before making any decision on what to do with your pension. If you proceed without using Pension Wise you may not have all the information you need to make a fully informed decision.Continue to question five
As taking your pension is an important and irreversible decision, we would strongly recommend that you take professional financial advice.
If you already have a financial adviser, please consult them. Otherwise, you can go to www.unbiased.co.uk to find a professional financial advisor in your area or contact us for more information. Please note: you may be charged for advice provided by a financial adviser.
If you would like to seek professional financial advice first, please exit this page and return once you’ve spoken to a professional financial adviser.Continue to question six
Even though the majority of investments in the market are from reputable firms, you should be aware investment scams do exist. There’s a chance that fraudsters will try to target people with access to sums of money. If you’re approached about a new investment opportunity, we strongly recommend that you discuss it with a financial adviser first. Never be pressured into making a quick decision about investments. Make sure you know how to recognise scams and protect yourself. Common tactics include things like cold calling, promises of high returns, overseas investment opportunities and green investments such as bogus energy conservation. We strongly recommend you visit www.pensionwise.gov.uk/scams for further information.
You can also protect yourself by ensuring your Adviser is registered with the Financial Conduct Authority. You can do this by checking the Financial Conduct Authority register.Continue to question seven
Do you plan to use this lump sum to help to provide an income for retirement?Yes No Not sure Change answer
Our research shows it is common for customers to underestimate how long they will need their pension pot to last them in retirement.
You should think carefully about how long you might need your fund to last when taking money from it. You should consider all sources of income you will have available to you in retirement.
By cashing in your pension now it could increase the chance of you running out of money later in retirement. By continuing this process and taking your policy as a lump sum, it might mean you only have state benefits to fall back on. If you want a guaranteed income for life, you should consider using your fund to buy an annuity.Continue to question eight
Do you plan to invest any of the money you are taking from your pension savings?Yes No Not sure Change answer
You should always explore the charges associated with any new investment product and consider how these compare with those of your current pension product as they may be higher. The higher the charge an investment has the greater growth you will need in order to get a good return.
Also, while the vast majority of investments in the market are from reputable firms, you should be aware investment scams do exist. There’s a chance that fraudsters will try to target people with access to sums of money. If you’re approached about a new investment opportunity, we strongly recommend that you discuss it with a financial adviser first. Never be pressured into making a quick decision about investments.
These have been on the increase and common tactics include things like cold calling, promises of high returns, overseas investment opportunities and green investments such as bogus energy conservation.
You can protect yourself by making sure your adviser is registered with the Financial Conduct Authority. You can do this by checking the Financial Conduct Authority register.Continue to question nine
Are you in receipt of or expect to be in receipt of any means tested benefits? For example housing benefit.Yes No Not sure Change answer
If you receive any benefits you should be aware that certain benefits are means tested and can therefore be reduced (or stopped) depending on the amount of money/savings you have. Cashing in your pension can affect any means tested benefits you receive.
If you are concerned about this we would strongly recommend speaking to your local benefits office before taking any money from your pension. If you would like more information please exit this page and return once you have made a decision.Continue to question 10
Your pension is generally protected from creditors but once you start taking an income or lump sum from it, creditors may have a claim over the money. Is this a concern to you now or in the future?Yes No Not sure Change answer
While your pension is invested it is generally legally protected from any creditors (people you owe money to), however when you start to take money from your pension, creditors may be able to claim all or part of any amounts you take.
If you have any debts it is important to understand that, while not an issue for most people, when you take money from your pension this may give any creditors a call on the money. This could also apply to any further pension benefits taken in future.
You can also find more information on debts and creditors at the Money Advice Service.
If you would like to review the link above please exit this page and return once you have made a decision.Continue to final question
Have you considered your tax implications by taking this full encashment?Yes No Not sure Change answer
When you cash in your pension as a lump sum, normally 25% is tax-free and you are liable to tax on the remainder at your marginal rate of income tax. Your marginal rate is calculated based on your taxable income in that tax year with the amount of your pension pot over the tax-free lump sum being treated as income. This could result in you being pushed into a higher tax bracket for this tax year.
Not sure how much tax you could pay? Use our tax calculator to get an indication of how much tax might be deducted immediately from your cash lump sum.
HMRC require us to apply emergency tax to the balance of the lump sum after the 25% tax-free portion unless your lump sum qualifies as a small pot lump sum (£10,000 and under) in which case we will apply a flat basic rate. This may be more or less than the rate of tax you are due to pay and you can reclaim or pay any extra tax due direct from HMRC.
If you decide to take a full encashment (except a small pot) you will be subject to the Money Purchase Annual Allowance (MPAA) which is £4,000 for tax year 2018/19. This means that, if the total contributions paid to your pensions, either by you or your employer exceed £4,000 per annum for 2018/19 you will be liable to a tax charge.
Tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future.
If you do have any questions or require further guidance you can contact HMRC directly on 0300 200 3300 or let us tell you more about taking all your pension as cash.Show me my options