Find out more about cashed pensions
Now that you’re allowed to take cash from your pension, it can be an ideal source of funds, especially if you really need cash, and you have no other sources available. But due to penalties and tax fees, you might want to do this the smart way.
- Take only a slice of your pension, so you don’t need to pay any tax. 25% of the entire pot is tax-free. What’s left, you can withdraw during retirement age.
- Take a tax-free lump sum of your entire pension pot, which is 25%, and then leave the rest.
If you think 25% is insufficient, you can always go higher. Just be ready to face the taxman. You also have an option to take out your entire pension in one go, especially if you are left with no other choice, but you might be slapped with higher rates of tax. Remember that 75% of your pot is subject to income tax. Taking cash for the first time? Your pension provider may need to apply emergency tax on your withdrawal, but this is something you can claim back.
Why is it less ideal to take cash from your pension?
If possible, you should look for an alternative source of funds, rather than cash out all your pension. Remember that if you take 25% now, you may not have enough to live on during your retirement.
There is always the State Pension, but even that may be insufficient. The situation could get worse if you withdraw your entire pension pot. You not only pay penalties and taxes, you may be left with nothing come retirement age.
Think you may be due a tax refund? Apply here to get your tax back.