How it works
We’ve put together a few examples to show you how much tax you might pay if you chose to take 25% of your pension pot as tax free cash and the rest as a taxable lump sum.
Pension pot value
|
25% tax free amount
|
Remaining pension fund which is taxable
|
The amount of income tax deducted
|
The total amount you'd receive from us (including your 25% tax free amount)
|
£30,000
|
£7,500
|
£22,500
|
£8,503
|
£21,497
|
£60,000
|
£15,000
|
£45,000
|
£18,628
|
£41,372
|
£100,000
|
£25,000
|
£75,000
|
£32,128
|
£67,872
|
The above calculations have been done using the emergency tax code for the 2024/2025 tax year.
Please remember these are just examples and the tax you could pay could be different based on your own circumstances.
How will I be taxed?
If you decide to take your entire pension pot as a cash lump sum we will deduct the tax you owe before we pay you the cash.
You may pay emergency tax on the money you take from your pension, which means you will receive less income than you expected. You can claim back any overpaid tax from HM Revenue and Customs.
The amount you take from your pension will be added to other income you receive from other sources during the tax year and could mean you end up in a higher tax bracket.
Taking
money from your pension impacts how much you can contribute to other
pensions.
Before taking money from your pension savings the maximum amount you can contribute to a pension each year and still receive tax relief is usually £60,000. Once you take money from your pension, you’re restricted to contributing £10,000 gross towards
any other pots you may have. This is known as the Money Purchase Annual Allowance (MPAA).
For more details view our tax and your pension guide.