How does flexible access work?
Flexible access video transcript
When you reach age 55, you can enjoy flexible access to your retirement savings.
You can set up a regular income, or simply take some cash whenever you need it. The rest of your money will stay invested in your plan, so it still has time to grow. Usually, the first 25 per cent of any money you take out of your plan will be paid tax free. You can choose to take all your tax free cash in one go, or spread it out over a series of smaller payments. When you die, any savings you have left can be passed onto your loved ones.
Things to watch out for
With flexible access, there’s a risk your money could run out earlier than you’d like, so you’ll need to manage your income carefully. Also, if your investments don’t perform as well as you’d hoped, the value of your savings could go down - meaning you’d have less money to live on. If at any time you need more certainty, you can always choose to buy a regular secure income that’ll be paid for the rest of your life.
To find out more about your retirement options, talk to your financial adviser, or visit www.tzzssw.com/retirement.
Get up to speed
If you’re planning to use flexible access, there’s lots to think about. Select a question below to see how flexible access works and what it could mean for you and your pension savings.
What can I do with flexible access?
- Enjoy the income you need, when you need it
You can take cash withdrawals, set up regular income payments and make changes as often as you need to.
- Take some tax-free cash
You can usually take up to a quarter of your pension savings as a tax-free lump sum*. This can be paid in one lump sum, or spread out over a series of smaller cash payments.
- Give your savings more time to grow
Whatever you leave in your plan will stay invested – meaning it still has potential to grow.
- Change your mind whenever you like
If your needs change, you can use the pension savings you have left to buy a secure income – this will pay you a guaranteed, regular income for the rest of your life.
*You may be able to take more than this if you successfully applied to HM Revenue & Customs for a greater allowance.
What do I need to watch out for?
- You're still exposed to investment risk
While your money stays invested, there are no guarantees it will grow. So if your investments perform poorly, you could get back less than you started with.
- You could run out of money before you die
With flexible access, your income isn't guaranteed to last forever. So if you take too much money, live longer than expected or if your investments don't perform as well as you'd hoped, you could run out of money before you die.
- You’ll need to actively review your plan
As with any flexible access arrangement, regular reviews are key. You'll need to make sure the money you're taking out is sustainable - and adjust things if there's a risk your savings will run out too soon.
- Saving into other pension plans could be restricted
When you start taking an income from a flexible access plan, the government puts a limit on how much you (and your employer) can save into other money purchase pension arrangements without a tax charge. This is called the money purchase annual allowance – and it’s currently set at £4,000 a year.
- Your entitlement to state benefits could be affected
The amount of income and/or tax-free cash you take from your pension savings could affect your entitlement to means-tested state benefits, this includes such things as housing benefits and council tax reductions.
You should remember that tax rules depend on your individual circumstances and may change in the future.
What happens when I die?
If you have money left in your plan when you die, it can be passed on to your loved ones – usually free of inheritance tax.
- If you die before age 75, your pension savings can normally be paid to your loved ones however they like, tax free.
- If you die aged 75 or older, your pension savings can be paid to your loved ones however they like, subject to tax.
Remember - you can shop around
When you come to access your pension savings, you’re free to shop around. That means you don’t need to stay with the pension provider you’ve been saving with – you can take your savings to the market and see who can best meet your needs.
How does this income option compare?
|Your options||Secure income||Flexible access||Take cash|
|Can provide a regular income?||Yes||Yes||No|
|Is my income guaranteed for the rest of my life?||Yes||No||No|
|Can I change how much money I receive?||No||Yes||Yes|
|Could my money run out later in retirement?||No||Yes||Yes|
|Can I do something different with my savings in later years?||No||Yes||Yes|
|Can I take some tax-free cash?||Usually up to 25% of your pension pot*||Usually up to 25% of your pension pot*||Usually up to 25% of your pension pot*|
|Find out more||Secure income||Take cash|
I'd like to learn more about flexible access
Flexible access lets you dip into your pension savings, while the rest stays invested in your plan. Simply tell us how you took out your pension plan - and we'll take things from there.
Find the support you need
You've got some big decisions ahead - and no doubt you'll have some questions.
The good news is, there's plenty of support available.
Find tailored advice that's right for you
Access free support from the government
Use our retirement planner tool
More about pensions and retirement
The tax rules when you want to take money from your pension
We can’t personalise how much tax you might pay, but we can give you some general information about how tax works.
The tax rules and limits of your pension explained
There are limits on the amount you can invest in pension plans and on the maximum value of pension savings that you can build up without being subject to a tax charge.
Your pension questions answered
Find the answers to some frequently asked questions about pensions.
A guide to a secure income
A secure income is a financial product that allows you to convert your retirement savings into a regular, fixed amount of money for the rest of your life. This is also called an 'annuity'.
Investment types explained
Get to know more about deposits, equities, property and other investment types.
The new state pension - your questions answered
When the new state pension was introduced for those reaching pension age from 6th April 2016 it was intended to be much simpler than the system it replaced.
How to make sure the right person gets your pension when you're gone
Read our guide on how to make sure that the right person gets your pensions benefits.