Thinking about leaving your pension alone?
Although you can usually access your pension from the age of 55 (57 from 6 April 2028 unless you have a protected pension age), you may not be ready to retire. So what happens if you leave your money where it is?
Your money could grow
Money left in your pension stays invested and has the potential to grow
Continue making payments
Keep adding to your pension pot to build for your retirement
Choose when you’re ready
You can make a decision about how you access your money when the time is right
The value of your pension can go down as well as up and you may get back less than has been paid in.
Keeping your pension savings invested
- From the age of 55 (57 from 6 April 2028 unless you have a protected pension age), you can normally start using the money you’ve saved in your pension. In most cases, you get a range of options for how you do this
- But you don’t have to decide what you want to do with it straightaway. You can leave your money where it is until you’re ready to use it
- If you leave your money in your pension, it’ll stay invested and it may continue to grow. But because it’s invested, its value could go down as well as up and you may get back less than has been paid in
- It’s also worth remembering that you can keep paying into your pension beyond 55, which can be a real boost to your savings
- You’ll need to let your pension provider know if you plan to delay your retirement
What do you need to consider?
There are some things you’ll need to think about when making your decision:
- The ins and outs of your pension
Make sure you read through the terms and conditions of your pension.
Some pensions can have rules which mean you could lose out if you don’t use your money at certain times. For example, you may need to use your money to buy an income or annuity when you reach 75, or you may need to take your money at the age you originally planned to avoid losing valuable guarantees.
So, make sure you know how your pension works and note down any questions you want to ask your provider when you contact them.
If you’ve got a pension with us, you can find out how to contact us or manage your pension quickly and easily by logging in to MyAviva.
- Your money will still be invested
As with all investments, there’s a risk that the value of your pension could go down, as well as up. If that’s a concern you can choose to change how your money is invested to lower the amount of risk involved.
Plus, you’ll still need to pay any fees or charges associated with your pension, so make sure you’re taking those into account.
- Tax allowances and state benefits
There may be tax implications to consider if you delay your retirement. Any regulatory changes to income tax, inheritance tax or government allowances could affect your pension.
Delaying retirement may also affect your eligibility for Pension Credit, Housing Benefit and Council Tax Reduction.
- Annuity rates can change
If you eventually decide to buy a guaranteed income for life (an annuity) with your pension pot, you may not get as good a deal as you would buying one now. This is because the rates they’re based on can go down as well as up.
- Life insurance as part of your pension
If you have life insurance under your pension policy, your life insurance will come to an end at your original retirement date, not necessarily when you take your pension money.
- If you die before taking any of your pension money
If you die before age 75 your pension pot can usually be passed on to your beneficiaries free of income tax. On or after 75, your pension pot still gets passed on to your beneficiaries, but they may have to pay Income Tax on it. Inheritance Tax is not normally paid on any money that’s passed on, regardless of your age when you die. Keep in mind that tax treatment depends on your individual circumstances. This information is based on our understanding of current UK tax legislation and may be subject to change in future.
If you’re looking for help with your pension or retirement options, our financial advice support team can help you decide whether financial advice is right for you.
Pension Wise from MoneyHelper is a free, government-backed service offering clear, impartial and specialist guidance on your retirement options. If you’re aged 50 or over, this service is available to you.
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