Accessing your pot

When considering taking money from your pension pot, you'll need to think about a number of things:

• Any money you take from your pot, excluding any tax-free cash, will be added to other taxable income you receive during the tax year to work out what rate of income tax you'll need to pay. Taking or drawing down large amounts from your pot may push you into a higher tax bracket and could also affect your entitlement to certain means-tested State benefits. If you can, it might be worth considering spreading the withdrawals over more than one tax year as this may reduce the rate of tax you pay. It's important you understand what this means for you before you make a decision, particularly if you're still working.
• The law and tax rates relating to pensions may change in the future.
• It's important to consider how many years you're likely to need an income for, as your pot may run out before you die.
• If you take any income from your pension pot other than your tax-free cash entitlement, your annual allowance may reduce to £10,000. This means any new contributions you and your employer pays into a pension scheme over this allowance will be subject to a tax charge (this is of particular importance if you are 55 or over, for example, and still contributing to your pot).
• If you die before the age of 75 your pension pot can be paid as an income or as a cash lump sum, tax-free, to your beneficiaries. After age 75, your pot can be paid as an income or lump sum subject to the beneficiary's marginal rate of tax (2024/2025).

Protected tax-free cash

If you choose to transfer your pension pot to a new scheme, including the Mastertrust Scheme, HMRC regulations will not allow you to keep any protected tax-free cash entitlement that you may have.

With protected tax-free cash, you could take more than 25% of your pension pot from your current plan as a tax-free cash sum but under the Mastertrust Scheme you would be limited to a maximum of 25% tax-free cash.

Pension scams

It's important to be very careful who you talk to about your pension. In recent years there has been a dramatic increase in pension scams with victims losing their retirement savings to fraudsters.

Typically such scams start with an unsolicited phone call or text message, and promise unrealistic returns. Victims are put under considerable pressure to make quick decisions and once the money is gone, there's little chance of getting any of it back.

Visit scamsmart.fca.org.uk for more information.

Make sure that any business you deal with is authorised by the Financial Conduct Authority by checking fca.org.uk.

Managing your account online

Manage Your Account is a user-friendly online service designed specifically to help in the years before you access your pension pot. Allowing you to see how your pot is invested and performing, you can also find out more about the funds available to you and make changes to your investments.

You should shop around to find the most suitable provider and transfer some or all of your pension pot to one or more providers. Different providers offer different options, features, rates of payment, qualifying criteria and charges.

Flexi-Access Drawdown allows you to select some or all of your pension pot and take a maximum of 25% of the amount as a tax-free cash lump sum (£7,500 on a £30,000 pot), while the remainder stays invested.

After taking any tax-free cash your remaining pot will stay invested until you choose to take any more money from your pot. This can be on a regular and/or occasional basis.

It’s important to choose an investment approach for the money left invested that best suits your objectives for the future. Find our more about your investment options with a flexible income.

Staying invested means your pot may benefit from additional investment growth, helping to continue to build your savings while drawing an income.

The value of your pot may go down as well as up. Your pot will depend on investment performance in addition to other factors (such as charges and the effect of inflation), including how much income you choose to take.

The more income you take the more likely the savings in your pot may run out. You will need to consider:

• How much you take out, and how often.
• How the investments perform, and whether your investment choice is right for you.
• What happens if you live longer than expected and your money runs out.
• How you will provide for your dependents when you die.

Taking income from your WorkSave pension pot with Legal & General

To join the Mastertrust Scheme you must be under the age of 75.

Emergency tax will be deducted from the first amount you take. This might mean you pay more or less tax than is actually due. If this happens, HMRC will adjust this automatically but if you don't want to wait, you can contact them directly.

When you select the amount of your pot you want to use for a flexible income, you can choose to take an amount up to 25% tax free. If you select less than 25% tax-free cash, you can't change this and access the percentage of tax-free cash you didn’t take at a later point from that pot. However if you have some of your pension savings remaining to take at a later date, you can take 25% tax free cash from this pot when you access it.

For more information about taking Flexi-Access Drawdown please take a look at our guides Mastertrust Pension Access Scheme and Taking Money from My Pension.

You can take some or all of your pot as a cash lump sum. A maximum 25% of this will be tax-free with the remaining 75% taxable as income. Unless you take your entire pot, anything remaining will stay invested until you're ready to access your pot again.

If you're interested in cashing in all of your pot and would like to take this option, please refer to the retirement information for your existing scheme.

Taking some of your pension pot in the Legal & General MasterTrust as cash lump sums

Emergency tax will be deducted from the first amount you take. This might mean you pay more or less tax than is actually due. If this happens, HMRC will adjust this automatically but if you don't want to wait, you can contact them directly.

For more information about taking cash lump sums, please take a look at our guides Mastertrust Pension Access Scheme and Taking Money from My Pension

Use some or all of your pension pot to buy an annuity, taking up to 25% of the amount selected as your maximum tax-free cash.

An annuity will provide you with a guaranteed taxable income for life or for a fixed term depending on the type of annuity you buy.

If you're interested in an annuity and would like to take this option, please refer to the retirement information for your existing scheme.

You can also contact Pension Wise by calling 030 0330 1001 or by visiting www.pensionwise.gov.uk.