From age 55 (57 from 6 April 2028 unless you have a protected pension age) you can start using the money you’ve saved in your pension. One option is to take the money in cash in a way that suits you. There are different ways of doing this, with their own tax implications.
Some older pensions may not give you as much choice over how you take your cash, so it’s sensible to check the terms and conditions of your policy. If it doesn’t offer you the approach you’d like to take, you may want to consider transferring your pension to get greater flexibility. Our Aviva Pension offers flexible options for using your money.
You can take money from your pension as and when you need to through income drawdown. It allows you to receive the tax-free part of your pension (usually 25% of your total) as either a single lump sum or in instalments, and to take the taxable part at a later date if you wish. This means it can be a flexible approach that you can use to complement your personal, income and tax circumstances.
Every time you take tax-free cash, three times what you take will be moved into what’s called a drawdown account. This is the taxable amount that relates to your tax-free withdrawal. The drawdown account remains in your pension so both pension and drawdown section stay invested in the funds selected. All money within your pension can go down as well as up in value so you should monitor its performance regularly.
You can take money from your drawdown account whenever you want, but any amount you take will be taxed as income.
You can take your tax-free money in a single lump sum