22nd August 2023
The importance of understanding tax-free pension withdrawals
MANY OVER-55s ARE UNAWARE THAT THEY CAN ACCESS 25% OF THEIR PENSION POT TAX-FREE
A surprising 43% of individuals over 55 need to be made aware that they can withdraw up to 25% of their pension pot tax-free, according to recent research.
Knowledge could lead to better decision-making when it comes to accessing pension savings. Similarly, 52% of those surveyed between the ages of 50 and 54 were also unaware of this rule, indicating a widespread lack of understanding about pension withdrawal options.
MAXIMISING YOUR TAX-FREE PENSION WITHDRAWAL
The study found that among the 57% of over-55s who know about the tax-free pension withdrawal option, 21% have already taken advantage of this benefit, while 9% plan to do so in the future. Most individuals who plan to take their tax-free lump sum did or will do so at retirement (69%). However, 16% have made or intend to withdraw at different points during retirement.
UNDERSTANDING THE VARIOUS OPTIONS AVAILABLE
The study emphasises the importance of understanding the various options available when withdrawing from your pension pot, including the 25% tax-free cash entitlement. Considering factors such as whether to take the lump sum all at once or split withdrawals into smaller chunks over time and the potential implications and benefits of each approach are essential.
IMPORTANT QUESTIONS REGARDING TAXFREE PENSION WITHDRAWALS HOW MUCH CAN YOU WITHDRAW TAX-FREE?
Typically, most people can withdraw 25% of their total pension pot tax-free, although this may vary depending on the type of pension plan and if you’ve exceeded your…
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 Opinium conducted research among 2,000 UK adults aged 18+ between 12–16 May 2023 for Standard Life, part of Phoenix Group. Results have been weighted to be nationally representative.
A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless a plan has a protected pension age).
The value of your investments (and any income from them) can go down as well as up, which would have an impact on the level of pension benefits available.
Your pension income could also be affected by the interest rates at the time your take your benefits.