Delaying taking your pension pot

If you already have enough income to live on – either because you are carrying on working or you have other income from savings or investments to live on – you may be able to delay accessing your pension pot beyond your selected retirement date, or your scheme’s normal retirement date.

How it works

There’s no hurry to start taking your pension if you don’t need to. But check whether restrictions apply or if you’ll lose income guarantees if you take it later.

Your pot continues to grow tax-free until you need it – potentially providing more income once you start taking money out.

If you want to build up your pension pot further you can continue to get tax relief on pension savings of up to £40,000 each year (tax year 2016-17) until age 75. See our guide Tax relief on pension contributions.

Things to think about

Be sure to check with your pension scheme or provider whether there are any restrictions or charges for changing your retirement date, and the process and deadline for telling them.

Also check that you won’t lose any income guarantees – for example, a guaranteed annuity rate (GAR) – by delaying your retirement date.

The value of pension pots can rise or fall. Remember to review where your pot is invested as you get closer to the time you want to retire and arrange to move it to less risky funds if necessary.

If you want to delay taking your pot but your scheme or provider doesn’t have this option, get guidance or advice and shop around before moving your pension.

The longer you delay, the higher your potential retirement income, however this could affect your future tax – and your entitlement to benefits as you grow older, for example, long-term care costs. Find out more about the effect of income and savings on benefits in our guide on tax relief on pension contributions and benefits in retirement.

You could instead delay taking some of your pension. For example, you may be able to arrange to retire gradually, or change to working part-time or flexibly and then draw part of your pension.

If you want your pot to remain invested after the age of 75, you will need to check with your pension scheme or provider that they will allow this. If not, you may need to transfer to another scheme or provider who will.

What happens when you die?

If you die before age 75 your untouched pension pots can pass tax-free to any nominated beneficiary. The money will continue to grow tax-free as long as it stays invested, and, provided they take it within two years, the beneficiary can take it as a tax-free lump sum or as tax-free income. If they take it later, they pay tax on it.

If you die after 75 and your nominated beneficiary takes the money as income or as a lump sum payment, they will pay tax at their marginal rate. This means that the money will be added to their income and taxed in the normal way.

Lifetime allowance charge for large pension pots

If the total value of all your pension savings when you die exceeds the lifetime allowance (currently £1m), further tax charges will be payable by the beneficiary. To find out more about the lifetime allowance see our guide Lifetime allowance for pension savings.