Taking your saving pot all as cash in one go – tax implications
You can take your whole savings pot as a one-off cash lump sum. Although this may feel like the best option, you may wish to consider possible tax issues which may affect you.
Once you turn 55, you’ll need to think about:
You can start taking your TPT savings any time once you’ve reached age 55. Remember though, unless you have other savings or income, this money will need to last for the rest of your life.
You can choose how to use your retirement savings from one, or a combination of, the following options:
Regardless of which option (or options) you choose, you are able to take 25% (or a quarter) of the total value of your savings as a tax-free lump sum.
If you choose to take your savings pot as a cash lump sum, this will be taxed as if it were income (25% will be tax free, the rest will be subject to Income Tax).
Depending on your total cash lump sum amount and whether you’re receiving other income (such as from other pension savings, or employment if you’re still working), then a cash lump sum could put you in a higher tax-bracket and land you with a higher tax bill.
Every member has a personal allowance which means they can receive an income of up to £12,570 each year, which is not taxable. So, if a member only has income paid to them either below or the same as the personal allowance, they do not pay income tax.
On the higher end, if the total taxable income after taking away the Personal Allowance is larger than £37,700 a year, then any income over this is taxed at 40%.
If you haven't registered for your Retirement Savings Account yet, click here to find out how you can do it