Take your pension pot as a number of lump sums

You can move your money to another pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option. You can decide when and how much to take out. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. Each time you take a lump sum, normally a quarter of it is tax-free and the rest will be taxable.

You will need to transfer to a different pension provider to do this.

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

What is this option?

This option allows you to move your money into a pension pot and take lump sums from it as and when you need to, while the balance remains invested. You can continue to do this until your money has run out.

If you start taking your pension pot as a number of lump sums, the tax relief you are entitled to each year on any future pension savings will be restricted to the amount of the ‘Money Purchase Annual Allowance’ (MPAA), currently £4,000 per annum, and you’ll be charged additional Income Tax on contributions in excess of this. Your future pension savings to which the limit applies, include contributions paid by you and/ or your employer into a defined contribution pension (i.e. a pension other than a scheme that pays you benefits based directly upon your salary and service). You should consider this carefully if you intend to continue saving for your retirement after you start taking your pension pot as a number of lump sums.

How your payments would be taxed

Each time you take a lump sum from your pension pot, 25% (one quarter) will be paid tax free and the other 75% (three quarters) will be taxable as income.

Each taxable lump sum may increase your overall income such that you will need to pay some tax, even if your income is normally too low to pay tax. If you already pay tax on your income, you may find that the tax on part of your overall income in the tax years that you take any lump sums is charged at a higher rate of Income Tax than you normally pay.

Income Tax will be deducted from each taxable lump sum payment before you receive it, in accordance with HMRC rules. The tax that HMRC rules require to be deducted may be more or less than you owe. It will be your responsibility to contact HMRC to obtain a refund, or pay any additional tax due.

You may be able to minimise the tax you pay on the money you take from your pension pot by taking your lump sums over a number of tax years.

If you take your pension pot as a number of lump sums, depending on your circumstances, you may create or increase any liability to Inheritance Tax that may apply on your death. The current point at which Inheritance Tax applies to an estate value is £325,000.

Please bear in mind that the government may change tax rates and rules in the future.

Safeguarded Benefits

Some pension pots contain ‘Safeguarded Benefits’, which provide a potentially valuable guarantee relating to the ‘income for life’ option. The guarantee may entitle you to receive an income for life that is higher than would normally be available. The information provided to you with this Fact Sheet will tell you if any part of your pension pot includes Safeguarded Benefits. If it does, we recommend you obtain professional advice before making a final decision that involves losing that guarantee. And if the value of the part of your pension pot that includes such a guarantee is more than £30,000, we are required to obtain confirmation from your adviser that you have received appropriate independent advice, before we may release any of that part of your pension pot to another provider to take as a number of lump sums.

State benefits

Taking your pension pot in a number of lump sums could affect your entitlement to State benefits, now or in later life. If you are currently receiving State benefits and/or you expect to receive them in the future, you should check whether there may be a reduction in your entitlement to them if you choose to take your pension pot as a number of lump sums. There is more information about how obtaining lump sums can affect your State benefits at GOV.UK.

What happens to your pension pot when you die?

Any untouched part of your pension pot will pass to your beneficiary. If you die before age 75, this will be paid tax free (provided the money is paid within two years of the provider being notified of your death, or otherwise it will be added to the beneficiary’s other income and subject to Income Tax). If you die at or after age 75, the untouched part of your pension pot will be added to the beneficiary’s other income and subject to Income Tax.

Other things to think about

Once you’ve taken this option you won’t be able to change your mind subsequently, so you need to be certain that it is the right choice for you.

  • If you choose this option there may be charges each time you take a lump sum and/ or there may be restrictions on how many lump sums you can take in a year.
  • Your pension pot reduces with each lump sum you take; the value of your pot’s investments may increase over time, but there’s also a risk that they could reduce in value.
  • You will not receive a regular income for life from your policy and neither would your spouse, civil partner or dependant, if you die before them. Before deciding, you should consider what other sources of income are available to you, and others who may be dependent on you for income. You may risk running out of money in your retirement.
  • If you have any outstanding debts, then any lump sums taken from your pension pot may be available to your creditors if you fail to keep up your payments to them.

Please read about Pension Scams and Pensions Advice.

Find out about your other options.

Tap the options below for an overview of available options to you.

Keep your pension savings where they are

You can delay taking money from your pension pot to allow you to consider your options. Reaching age 55 or the age you agreed with us is not a deadline to act. Delaying taking your money may give your pension pot a chance to grow, but it could go down in value too.

Your policy can be extended to a maximum age of 75. You will need to choose one of the other options by the time you reach 75.

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

Find out more

Use your pension pot to get a guaranteed income for life

A lifelong, regular income provides you with a guarantee that the income will last as long as you live. A quarter of your pension pot can usually be taken tax-free and your income payments will be taxable.

You use your pot to buy an insurance policy called an annuity that guarantees you an income for the rest of your life – no matter how long you live. If you want to take an income for life, you should shop around for the best deal. If you want to take an income for life with us you must do so by age 75

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

Find out more

Use your pension pot to provide a flexible retirement income

You can move your money to another pension pot and take an income from it. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too.

A quarter of your pension pot can usually be taken tax-free and any other withdrawals will be taxable whether you take them as income or as lump sums.

You will need to transfer to a different pension provider to do this.

You do not need to take a regular income.

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

Find out more

Take your pension pot as a number of lump sums

You can move your money to another pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option. You can decide when and how much to take out. Any money left in your pension pot remains invested, which may give your pension pot a chance to grow, but it could go down in value too. Each time you take a lump sum, normally a quarter of it is tax-free and the rest will be taxable.

You will need to transfer to a different pension provider to do this.

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

Find out more

Take your pension pot in one go

You can take the whole amount as a single lump sum. A quarter of your pension pot can usually be taken tax-free – the rest will be taxable. You will need to plan how you will provide an income for the rest of your retirement.

You can choose this option for one or more policies individually.

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

Find out more

Mix your options

You can also choose to take your pension benefits using a combination of some or all of the options over time. If you have more than one policy, you can use a different option for each policy.

If you are an Equitable Life policyholder, and the Proposal goes ahead, the options you currently have will continue to be available.

Find out more