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Leaving your pension untouched

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How it works

Although you can access your pension from 55 (57 from 6 April 2028), it doesn’t mean you have to. Depending on your circumstances, it might make sense to delay things for a while longer.

In a nutshell, you don’t have to do anything.

You can carry on with life as usual. There are a few reasons you might choose to do this, a key one being that you’d like to give your pension more chance to grow. Although remember, because your pension’s invested, it could just as easily fall in value, and you might end up with less than you paid in.

 

Another reason is that you don’t need it just yet. You might have other sources of income you’d like to draw upon first. For example, this could be an ISA, or other savings and investments. Maybe you’d like to continue working for the foreseeable, and have no plans on retiring any time soon. How you access your pension savings is a big decision, with significant implications for your future, so if you don’t feel like you’re ready to commit just yet, you don’t have to. There’s no rush.

Important things to consider

  • Your investments     

As you’re leaving your pension untouched, your money will remain invested. It’s important to review your investments to ensure they align with your goals and circumstances. This can have an effect on it’s future value.                                                                                                          

  • Understand the detail

Some pension plans may have rules in place which dictate that you need to access your pension savings by a certain time. For example, you may need to need to buy a guaranteed income (pension annuity), or set up a flexible income (pension drawdown), by age 75. Otherwise, you may end up losing out on valuable guarantees or benefits. So take time to look into the terms and conditions, and get financial advice if you’re unsure.

  • Annuity rates

If you end up deciding to buy a guaranteed income for life (annuity), it’s important to know that pension annuity rates are subject to change, and can go down as well as up. So there’s a chance you may not get as good a deal in the future as you could now. Having said that, because rates are based on your potential life expectancy – you might get more favourable terms when you’re older. Financial advice can help.

Frequently asked questions

You can continue contributing to your pension as normal, but once you withdraw any taxable income over the 25% tax-free amount, the Money Purchase Annual Allowance (MPAA) comes into effect. This limits your total contributions to defined contribution pensions to £10,000 per tax year – and exceeding that could result in tax charges.

Your pension pot can usually be passed on to your beneficiaries. The way this is taxed depends on your age at the time of death. If you’re under 75, your beneficiaries can typically receive the money tax-free – either as a lump sum or as income.

If you’re 75 or older, the money will be taxed at the recipient’s marginal rate. You can nominate who you’d like to receive your pension, and it’s worth reviewing this regularly to make sure it reflects your wishes.

It’s not so much a question of whether it’s right for you, but rather when the appropriate time to access your pension is. Everyone’s different, and your individual needs, goals, and circumstances will play a key factor in when you do so. For example, if you’re suffering from ill health, it might make sense to do so sooner rather than later. Financial advice can help.

Need more help?

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Need help deciding?

Choosing whether or not to leave your pension untouched is a big decision. If you decide to delay things, how long should you wait for? It can be tricky to understand what’s best for you, especially if you’re considering how other sources of potential income fit into the equation. Expert financial help can be invaluable in getting things right.  

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