Risk & Warnings
The pension options available to you have certain risks that you need to consider.
The pension options available to you have certain risks that you need to consider.
You can choose to take all of your savings as a one-off cash lump sum. If you take them all in one go, you’ll be able to take 25% tax-free but you may have to pay a higher tax rate on the remaining 75%.
It’s also worth thinking about how you’ll use your lump sum and making sure that it will last you for the whole of your retirement, especially if it will be your only source of income.
MoneyHelper provides money and pensions guidance from a number of government-backed organisations. You can find the information you need quickly and easily at moneyhelper.org.uk.
Regulated financial advice
A regulated financial adviser will aim to understand what you want from your retirement and provide you with a recommendation based on your personal circumstances.
If you’d like to look around for an adviser, you may want to check MoneyHelper’s directory at moneyhelper.org.uk/retirement-directory.
Taking your money as a series of lump sums can provide you with a flexible income without having to move your savings elsewhere. You’ll receive 25% of your savings tax-free, although the value of any savings you leave invested could go down over time and reduce the amount available to you. You’ll also continue to pay an annual management charge on the money left in your pension pot.
You should also be aware that taking cash withdrawals may affect your entitlement to income-related benefits. It may also have implications if you are in debt. Find out more via moneyhelper.org.uk or citizensadvice.org.uk, or speak to a regulated financial adviser.
An annuity is a guaranteed, regular income that you buy with all or part of your savings. You can choose to receive it either for the rest of your life or for a fixed period of time, and it’s provided by an insurance company rather than TPT.
There are lots of different annuities available. Once you’ve committed, you can’t change your mind, so it’s important to shop around and find an arrangement that suits your circumstances. As well as the amount of money it pays you, you might want to consider how regularly it’s paid – from monthly to annually – and whether you want to provide an income or lump sum for a dependent if you die.
You should also think about the way you receive your annuity payments. You can receive the same amount of money each time (a fixed annuity), an amount that gradually increases (increasing) or one that changes with inflation rates (index-linked). An index-linked rate can maintain your spending power as you get older, but you’ll receive lower payments than other arrangements – like fixed annuities – at first. If inflation rates were to fall in the future, it could also mean that you receive smaller payments.
It may help to think about your spending needs and how they will change as you get older, to make sure than any potential annuity will suit you now and in the future.
The payments you receive will be taxed as if they were income. If you’re still earning when you buy your annuity, your payments could take you into a higher tax band, so you should check this – and any fees your annuity provider will take – before you make a decision.
Find out more about taking an annuity >
This is where you take an income flexibly from your savings as and when you want. To do it you’ll need to transfer your savings into a flexible arrangement outside TPT.
You can take 25% of your savings as a tax-free lump sum and leave the rest invested. When you take the rest of your savings, it will be taxed as income.
As there are lots of types of flexible income, you should spend some time looking into your options with different providers. It’s also worth asking potential providers about any charges you’ll pay on the money you do and don’t withdraw, as they could reduce the amount of money you have left. A regulated financial adviser will be able to help you to do this.
As any money you don’t take will stay invested, the value of your remaining savings will go up and down. It’s important to consider this when planning your future needs and withdrawals.
Find out more about drawing a flexible income >
You may be able to combine the options above and take your pension in several different ways, although the availability of some options will depend on your personal circumstances.
The risks will depend on the combination of options you want to take, and you may wish to discuss them in more detail with a regulated financial adviser and any potential providers.
You don’t have to take your savings now. They’ll stay invested with us until you’re ready although, as with any investment, they will go up or down in value.
You can check the value of your savings at any time, and make changes to your planned retirement date, by logging into your Retirement Savings Account.
It’s a good idea to regularly check your savings, not only to see how much you have saved, but to consider your future lifestyle and whether you’ll have enough money to make it a reality.
You can also review your investment choices and update them if your circumstances or preferences change. For example, you might want to target better returns, or move your savings into our ethical investment fund.
If you are too ill to work, you might be able to take money from your pension savings earlier than usual. If you become seriously ill, it is usually possible to take all of your savings as a one-off serious ill health lump sum.
In both cases, you would need to provide satisfactory medical evidence and meet certain criteria, such as those set by HM Revenue and Customs. If you think this applies to you, please contact us.
If you’re not able to take your savings early, you might be eligible to buy an impaired life or enhanced annuity, which provides a higher level of income. If you are thinking about this option, you’ll need to answer a series of health and lifestyle questions. It’s important to answer these honestly so that they align with your medical records.
The lifetime allowance (LTA) is the total amount of savings you can take from all your pension schemes over your lifetime without facing a tax charge. The limit is set each new tax year.
If the total value of all your tax-relieved pension arrangements goes above the LTA, you will be taxed on any amount above this.
While you can take up to 25% of the value of your TPT pension as tax-free cash, the total amount of tax-free cash you can take from all your tax-relieved pension arrangements must not exceed 25% of the Lifetime Allowance.
If you decide to take your savings flexibly, the amount of money you or your employer can pay into any other registered pension(s) before you have to pay tax is reduced. This is known as the money purchase annual allowance (MPAA).
You’ll need to tell any other pension provider(s) that you’ve accessed your pension savings flexibly.
Find out more about the MPAA >
Pension scams can lose you your pension, and result in significant tax charges. Please remember that pension savers are being increasingly targeted by scammers attempting to lure them to ‘safe havens’. If you receive an unsolicited phone call, email or text relating to a pension transfer, or an offer seems too good to be true, please exercise extreme caution and speak to a regulated financial adviser before making a decision. You can find a list of advisers at moneyhelper.org.uk/retirement-directory.
If you haven't registered for your Retirement Savings Account yet, click here to find out how you can do it