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Heading into retirement? Then you’ve probably started thinking about how you plan to spend your time and, more importantly, how you’re going to fund it. Understanding your pension can be complicated – but it doesn’t need to be. We break down some commonly asked questions about your pension.
will I pay tax on my pension pot?
In the UK, pensions are considered earnable income and so you pay tax if your total annual income adds up to more than your personal allowance. In 2024/2025, this means in simple terms that you will pay tax if your income is over £12,570.
You can use our pension calculator to understand exactly how much you will receive after tax.
is it better to take a lump sum or monthly pension?
Deciding whether to take a lump sum or distribute your pension out monthly depends entirely on personal preference and what you want to do with your pension. If you want to invest your pension, you will likely want to withdraw a lump sum. However, if you are concerned about budgeting, monthly payouts may give you more control over your finances.
You may also want to use up more of your pension in the earlier years of your retirement – perhaps for a trip abroad or new hobby. It’s important to note however, that if you do take a lump sum, this can sometimes decrease in value overtime
Before you decide which option is best for you, it’s important to weigh out the pros and cons for each and decide what option suits your situation.
can I take my pension and still work?
There are no rules saying you can’t withdraw your pension whilst still in employment, however it’s important to consider a few things:
- Pension type: The rules for accessing your pension depend on the type of pension you have (e.g., workplace pension, personal pension).
- Tax implications: Taking your pension early might affect how much tax you pay.
- Pension growth: If you stop paying into your pension, it will stop growing.
can I withdraw my pension at 55?
Currently, most people within the UK can withdraw their private pension at 55, however this age is increasing. In 2028, this is set to change to 57. If you were born before 6 April 1971, however, this change will not affect you.
how much money should a 60-year-old have in the bank?
The amount you should have saved by age 60 depends entirely on your individual circumstances. However, some finance experts suggest that you should have at least eight times your income in your pension pot, or to the amount of £270,100.
what do I do if I haven’t got a pension?
If you haven’t got a private pension and are worried about affording essentials or wondering if you will even be able to retire, there are various things you can do, such as reviewing available state pension and other benefits. Read our guide for a full breakdown of what to do if you’re feeling ill-prepared for retirement.
what if my pension is not enough?
If you’re worried about your pension not being enough, then you may need to look at other options. Do you have any other assets or savings? Are you able to take up part-time work?
If you are concerned about affording essentials or entering financial hardship, please get in touch with our team to find out how we can help you.
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