⚠️ We are currently updating our 2020/21 tax guidance across the website
What is the tax position when I take money from my pension flexibly?
You may be able to draw money out of your money purchase or defined contribution pension very flexibly – as much as you like, when you like, from age 55. But do not rush. A hasty decision could cost you heavily in the form of an unwanted tax bill and even a tax credits/benefits overpayment. This section highlights key tax and related points to be aware of.
You have a great deal of control over what you take out of your money purchase or defined contribution pension and when.
The rules are very complicated in many ways and you should try to understand them before you act.
What is pension flexibility?
Flexible pensions were introduced from 6 April 2015. The rules apply to ‘defined contribution’ or ‘money purchase’ pensions – those where you have saved up a ‘pot’ of cash or investments and have to choose what you do with it. See below for the rules applying to defined benefit or final salary schemes.
Your pension provider might allow you to take what you like, when you like from your pension (as long as you meet certain requirements such as the minimum pension age). But they are not obliged to do so; so even though the tax rules allow flexibility, the options from your own pension provider might be limited. You might then be able to move your pension savings to another provider to get more flexible options, but this could also come at a cost.
After your death, your beneficiaries may be able to keep taking money flexibly from your remaining pension pot. Our page What happens to pension policies and life assurance policies the deceased held at death? provides more information.
Since the introduction of pension flexibility, fewer people use their pension savings to buy an annuity, but this remains an option for some.
The minimum pension age (the earliest age from which you can take money from your pension) is 55 for most people. Some public sector schemes are excepted from this rule, such as those for firefighters, police and the armed forces. People working in certain professions such as sports people, ballet dancers and deep-sea divers also have special exemptions. Some people will be allowed to retire early due to ill-health.
An annuity is a way of taking a regular income. You hand over your pension savings to an insurance company (not necessarily the same one you saved up your pension pot with) and in return they promise to pay you a guaranteed income stream.
You can buy different varieties of annuity to suit your personal or family circumstances, for example, the annuity:
- might be for a short period or paid for life
- could be paid during just your lifetime, or could continue to be paid to your spouse or partner after you die
- might die with you, or it could have a guaranteed part that is paid to your beneficiary or beneficiaries after you die. A beneficiary can be anyone you nominate. It does not need to be a family member.
Different types of annuity are shown in a helpful table on Pensionwise.
The choices you make about what you want from your annuity affect how much is paid. Deciding what to do with your pension pot requires careful thought and you should consider taking financial advice. You might also need to shop around with different providers to get the best value for money (also known as using your ‘open market option’).
Pension flexibility and annuities
Annuities still exist alongside pension flexibility. This means that they are an option for you when deciding what to do with your pension savings. For example, you could buy an annuity with part of your pension and take another part of it under the flexible pensions rules. As above, you should try to obtain financial advice if you can. Once you have bought an annuity, if it is for life there is no more flexibility with that part of your pension savings.
Tax on annuities
If you buy an annuity with your pension, the income you receive from it is taxable on you. If you have inherited an annuity on someone else’s death, the income might be tax free. See our page What happens to pension policies and life assurance policies the deceased held at death?
‘Defined benefit’ or ‘final salary’ pensions are a type of workplace pension which provide benefits based on your salary from your employer and the length of time you were employed there as a member of the scheme. The amount of pension you receive is determined by the rules of your pension scheme.
They have stricter rules than defined contribution pensions as far as what you can do with them is concerned, so you might not be able to take advantage of the flexible pension rules. Decisions on these pensions need careful thought and advice before taking action.
Although you might be allowed to transfer your fund from a private sector defined benefit scheme to a defined contribution scheme (excluding pensions that are already in payment), you will have to get advice before doing so unless your transfer value is under £30,000.
But if you are a member of a public sector defined benefit scheme, except for a Local Government scheme, transfers to defined contribution schemes will be restricted. (Although such transfers may be allowed in very limited circumstances.)
You will need to talk to your pension provider to establish the exact position in relation to the scheme that you are a member of.
If your defined benefit pension is worth only a relatively small amount, you may still be able to take it as a lump sum under the trivial commutation rules.
What should I consider when taking money from a pension?
It is important not to rush a decision on your pensions, if you can avoid it.
Consider everything – your circumstances (personal and financial), investment choices, charges you might incur on taking pensions early, future plans and, importantly, the consequences for tax, tax credits, universal credit and other state benefits.
Plan ahead: for example, you might pay less tax on money from pensions if you take it in stages, spread it out over a number of tax years, or wait until after you have stopped work.
But tax is not the only factor – there might be other reasons you need more money sooner, you will need to take into account possible future changes in your circumstances and you will have other investment-based issues to think about. We cannot cover those on this website, but we do strongly suggest you think about the tax situation very carefully before acting.
The rest of this page covers some important tax and state benefits points to consider before taking money out of your pension.
How much tax will I have to pay on taking money out of my pension?
You are allowed to take some money (usually 25%) out of your pension tax-free. But three-quarters (75%) of your pension savings are taxable as income.
Under flexible pensions rules, you can decide whether you:
- take your full tax-free amount up-front (in which case any further payments will be treated as fully taxable income); or
- take staged payments which are a mix of tax-free cash and taxable income (in which case, 25% of each payment will be tax free and the other 75% will be taxable).
Taxable amounts will be added to your other income, probably giving you an extra tax bill. The extra income could tip you into a higher tax rate, and/or could mean that you are no longer entitled to extra tax allowances.
Dave lives in England, so he is not a Scottish taxpayer. Dave’s salary is £18,050 in 2020/21 before tax. He decides to cash in his pension pot of £50,000 in full on 1 June 2020. 25% (£12,500) of it will be tax free and the rest – £37,500 – will be added to his salary.
His 2020/21 tax calculation looks like this:
Tax on this amount:
|Pension: taxable part||£37,500|
|Take off: personal allowance||-£12,500|
|Taxable amount, after allowances||£43,050|
|First £37,500 @ 20% (basic rate)||
|Remaining £5,550 @ 40% (higher rate)||
|Total tax bill||
Without cashing in the pension, Dave would have paid only £1,110 in tax for the year. So, the extra bill on the pension is £8,610. This means that of his total pension pot of £50,000, he is left with only £41,390 after tax.
The way in which tax is deducted means that Dave might also have had more than £8,610 taken off the taxable part of the pension under PAYE when he took the money out on 1 June 2020. HMRC might allow Dave to claim a refund immediately. See How will I be taxed when taking money out of my pension? below.
Dave: loss of marriage allowance and other possible tax charges
If Dave were married to Julie, who does not work or have any other income, Julie’s personal allowance for income tax would be unused. The couple would therefore be able to claim, in 2020/21, to transfer £1,250 of Julie’s allowance to Dave. This is under the marriage allowance rules and could save them £250 of tax.
But if Dave takes the money out of his pension as above, he becomes a higher rate taxpayer in 2020/21. This means the couple no longer qualify for the marriage allowance, so this would be an extra ‘cost’ of £250 on top of the tax charge we calculated above.
If Dave or Julie were still claiming child benefit, there would also be a high income child benefit charge.
From 6 April 2019, a Welsh income tax came into effect. However, for 2019/20 and 2020/21, it has no practical effect on the amount of tax Welsh taxpayers have to pay.
The tax paper trail can be complicated, but in general:
- Money from pensions will be taxed under the Pay As You Earn (PAYE) system.
- You might not pay the right tax at the right time.
- You might get PAYE coding notices from HMRC or papers (such as a P45) from your pension provider.
- You might need to claim a tax refund or pay some more tax later.
- HMRC might send you a tax calculation or Self Assessment tax return.
Below we explain in a bit more detail.
Tax is deducted at source using the PAYE system. If you are or have been an employee, you may recognise this as similar to the way your employer took tax off your wages or salary. When applied to pension income, the PAYE system deducts only tax – National Insurance contributions are not payable on pension income.
How your pension payment is taxed depends on whether you:
- decide to take part or all of your fund,
- have other PAYE income and
- receive the state pension.
As above, only part of your pension payment might be taxable, depending on how you choose to use your tax-free cash sum. The following comments apply only to the part of the sum that is to be taxed.
The pension provider uses a PAYE code number, but this is worked out on an ‘emergency’ or ‘month 1/week 1’ basis (see below for more detail on this). This is unless you give them a P45 for the tax year when you access your pension, in which case the pension provider should use the code number from it. You should have a P45 from a previous employer if you have stopped work, or perhaps from another pension provider if you have already taken money out of another pension pot in full. A P45 shows how much you have earned and how much tax you have paid since 6 April, and what code number your employer has been using.
How emergency codes work
When a pension provider operates an emergency code on a month 1 basis, they:
take off £1,042 from the payment – this is not taxed, being 1/12 of the standard personal allowance (£12,500 in 2020/21)
tax the next £3,125 at 20%, this being 1/12 of the basic rate tax band (1/12 of £37,500 in 2020/21)
tax the next £9,375 at 40%, this being 1/12 of the higher rate tax band (1/12 of £112,500 in 2020/21)
Any remaining amount (that is, above £13,542), they will tax at 45%.
If you live in Scotland and are a Scottish taxpayer, different income tax rates and bands apply to your pension income, but the same principles apply. There is more information in our section on Scottish income tax.
From 6 April 2019, a Welsh income tax has been introduced. However, for 2019/20 and 2020/21, there is no practical effect on the amount that Welsh taxpayers will pay.
If the pension provider were to use a weekly payroll scheme, the yearly figures would be divided by 52 and would mean even more tax was deducted. However, most are likely to use a monthly calculation.
This can be difficult to understand. You do not need to learn it, but it explains why the tax taken on these payments can be so high. An example may be easier to follow:
Taxable payment taken from flexi-access drawdown fund of £50,000 (after 25% tax-free payment has been taken). Note this example uses the UK rates and bands.
|Payment from flexi-access drawdown (after 25% tax-free amount)||
|Less 1/12 personal allowance||
|Amount taxed under PAYE||
|Tax @ 20% on first £3,125||
|Tax @ 40% on next £9,375||
|Tax @ 45% on remaining £36,458||
|Total tax deducted||
The result by the end of the year (whether you have paid too much or too little tax) could depend on, for example:
- Whether or not you have already used all of your personal allowance, in which case the above calculation might have given you too much tax free. This could be the case if for example you take a pension payment and have worked and been taxed under PAYE throughout the same tax year on a standard personal allowance code (1250L for 2020/21, or S1250L if you are a Scottish taxpayer and C1250L if you are a Welsh taxpayer) and could then mean you have not paid enough tax. HMRC will contact you calculating this underpayment and to agree with you how it should be paid.
Or, as is more likely to be the case:
- Whether or not you should be paying tax at the 40% and 45% rates on some of your income for the year overall. This is unlikely for many people, so you can see that you may have paid too much tax. HMRC may contact you about this overpayment and refund it to you, but you might be able to claim it sooner depending on the situation.
How do I get tax back if my pension provider has taken too much under PAYE?
This depends on whether you have:
- Taken all of your money out of a pension pot; or
- Taken part of your money out of a pension pot
If you take all of your money out of a pension pot
If you pay your tax under PAYE or if you complete a Self Assessment tax return each year, you can claim the overpaid amount back during the tax year.
Your pension provider should provide you with a P45 showing details of the payment, which you may have to send to HMRC when you claim a repayment.
If you retire and have no other income or just receive your state pension, use form P50.
If you take all your money out of your pension pot and you have no other income, use form P50Z.
If you take all your money out of your pension pot and have other PAYE income, use form P53Z. Note that if you have taken a pension lump sum under the ‘small pots’ rules, form P53 is required, which is different to the P53Z.
If you are not able to apply online or to download and print the forms yourself, telephone HMRC for printed copies.
The above are the forms to use to claim back tax during the tax year if you have taken everything out of a pension pot. For instance, you had £20,000 with XYZ Mutual and have taken all of the money and tax has been taken under PAYE. There is nothing left with XYZ Mutual (though you might still have another pension pot – say, £10,000 with ABC Investments – that you have not touched; that does not matter).
If you have taken only part of your money out of a pension pot
Tax overpayments and underpayments will be dealt with under the normal PAYE rules. This means that if you are taking regular payments or perhaps a series of irregular payments out of a pension pot, you may be refunded part of overpaid tax next time you take a payment if it is within the same tax year.
So let us say you had two pension pots, one of £25,000 and the other of £10,000. You have taken out £5,000 from the first, so there is still £20,000 left in it. Although your pension provider will take some tax under PAYE and tell HMRC about the payment and tax deduction, they will not issue a P45 as you still have money left in the pot. HMRC should issue a code number to the pension provider in case you take any more payments from it during the tax year (in which case the PAYE system might give you a refund of earlier tax paid).
If you take only part of your money out of a pension pot, and you will not take another cash payment from the pension pot before the end of the tax year, you can claim a tax refund (if appropriate) using form P55.
If you do not, or are not allowed, to claim a tax refund during the year
If you do not make a claim during the tax year, HMRC should look at all of your PAYE records after the end of the tax year. If you have not paid the correct tax, HMRC will send you a P800 calculation.
This should pick up on overpayments that have not been claimed within the tax year. But if the system fails, you may not hear from HMRC or you may get a P800 calculation that is incorrect, so you need to try to understand your situation for yourself.
Do I have to fill in a Self Assessment tax return?
If you usually complete a Self Assessment tax return, you will have to include the taxable element of your lump sum on the return. If you have claimed an in-year refund of part of the tax deducted under PAYE, using one of the forms mentioned above, you will also need to include details of the refund on the return.
If money you take from your pension means you have extra tax to pay or takes your total income over certain limits, you might be obliged to fill in a tax return even if you have not had to complete one in the past. See our guidance on whether you need to fill in a Self Assessment tax return.
If you have taken a defined benefit ‘trivial commutation’ (final salary pensions)
See our separate guidance on trivial commutations.
When is the best time to take money out of my pension?
This is not a question we can answer for you, as it will depend on many factors, such as your personal and financial circumstances, future plans, need for the money and so forth. But this guide shows that you can trigger a large tax bill when you take taxable lump sums from pensions under flexi-access arrangements. Not only that, but you might incur a further cost by creating a tax credits overpayment, a high income child benefit charge, or by affecting your entitlement to means-tested state benefits. If your lump sum causes you to become a higher or additional rate taxpayer, you may also lose the ability to claim the marriage allowance, lose all or part of your personal allowance and will also face restrictions to your personal savings allowance.
Planning ahead could therefore save you a great deal in potentially unnecessary tax charges and adverse impacts to your benefits position. For example, if you can afford to wait to take pension monies until the tax year after you retire from work, you might be liable to tax at a lower rate (and suffer no adverse tax credits consequences if you are no longer eligible to claim them).
Or, you might be able to consider taking your money out in stages. For instance, if you had a pension pot of £80,000, £60,000 of it would be taxable after taking out 25% tax-free cash. If this £60,000 is taken over six years, for example, and you have no other taxable income in those years, you might pay no tax at all (with the standard personal tax allowance set at £12,500 for 2020/21). But do remember that your state pension is fully taxable.
You will need to take great care if you claim tax credits and take money from a pension as your decision could cost you dearly.
Taxable income from pensions is also income for the purposes of tax credits. (The tax-free element of any pension income or lump sum is not to be included as income for tax credits.)
Taking money out of a pension could therefore mean you end up with a tax credits overpayment for the year in which you take the money out – this means that you may have been paid too much and have to pay it back.
It could also mean you end up with less tax credits in the following year as well. This is because tax credits are worked out using yearly rates and yearly income figures. Your income may well change from one year to the next but only changes over or under certain limits will alter the amount of tax credits you were awarded at the beginning of each tax year. The limits for changes in income from one year to the next are known as the income disregards.
You do not actually have to tell the Tax Credit Office about changes to your income until you renew your claim at the end of the tax year, but you might wish to tell them sooner about money taken from a pension in order to reduce the amount of any overpayment.
Taking money out of pensions can have unexpected consequences.
Child benefit is not in itself a means-tested benefit. This means that anyone with qualifying children can claim it. But there is a linked tax charge on some recipients of the benefit, or on the recipient’s partner if they are part of a couple, where income is over £50,000 in the tax year. This is called the ‘high income child benefit charge’ (HICBC).
We explain child benefit and the HICBC separately on our website. It is not something that most people on low incomes usually have to worry about, but it could become a problem for people taking sums out of their pension pot under the flexible rules if that tips their total income over the £50,000 limit. Note that the charge is applied for the year, so if, for example, you take a pension withdrawal in March 2021 and it takes your income over £50,000 for the year, the charge will apply to any child benefit payments you receive across the whole tax year – not just those after your income tips over the £50,000 threshold.
You may not usually have income anywhere near £50,000 a year. But that could change if you take a pension lump sum.
Example: Peter and his family
Peter earns £22,000 a year. He is 55 and has built up a pension fund of £50,000. His wife, Sue, is 42 and does not work. The couple have two young children, aged 3 and 5.
Sue claims child benefit totalling £35 a week. This works out to £1,820 for the 2020/21 year – you can check the amount of your child benefit for a tax year using the calculator on GOV.UK. (Note that the amount depends on the number of entitlement days in the relevant tax year – we suggest you check the GOV.UK calculator, as entering the right amount can be confusing. This is because the amount is not calculated based upon the 4-weekly payments you actually receive during the tax year.)
Peter wants to cash in his pension to pay off his £47,000 mortgage.
If Peter takes the full pension fund at once, he gets 25% of the £50,000 tax free – £12,500. He would have to pay tax on the rest – £37,500. The income tax on this without including the high income child benefit charge works out to £9,400. See note 1 below to see how this is worked out.
Also, Peter and Sue lose the ability to claim the marriage allowance for 2020/21. This costs them a further £250 in tax.
Furthermore, Peter has to pay a high income child benefit charge based upon total income of £59,500. This works out to additional tax of £1,729. See note 2 below to see how this is worked out.
So what is Peter’s total tax cost when cashing in his full pension in 2020/21?
|Lost marriage allowance||£250|
|High income child benefit charge||£1,729|
This means that of the total £50,000 pot, Peter will have just £38,621 left after tax charges. He will not have met his aim of paying off his £47,000 mortgage! And note that this does not include possible lost tax credits or other benefits, which might be a further significant cost of cashing in his pension – see note 3 below.
Added to that, Peter will have to register for Self Assessment and fill in a tax return so that he can pay the high income child benefit charge to HMRC.
The £37,500 is added to his salary of £22,000, which comes to £59,500.
His salary has already used up his personal allowance (tax-free amount for the 2020/21 year) of £12,500. It has also used up £9,500 of his basic-rate tax band (the amount on which he pays tax at 20%).
Peter’s remaining basic rate band is therefore £37,500 minus £9,500 = £28,000. The tax on that part of the pension lump sum at 20% is therefore £5,600.
The rest of the pension lump sum is taxed at the higher rate of 40%. This is therefore £37,500 minus £28,000 taxed at basic rate; so that leaves £9,500 at 40% which works out to be £3,800.
The total income tax bill is therefore £5,600 plus £3,800 which works out to be £9,400.
This is before adding in the high income child benefit charge or considering the loss of the marriage allowance.
The HICBC takes away 1% of child benefit for every £100 of income over £50,000. Peter’s total income is £59,500 (his salary of £22,000 plus the taxable part of the pension cashed in, £39,500). As Peter’s income is £9,500 over £50,000, the charge is 95% of their child benefit. So 95% x £1,820 is £1,729.
Note that we have assumed that Peter has not paid any pension contributions in the 2020/21 tax year. If he had have done, this could affect the income figure on which the HICBC is based, as the calculation uses adjusted net income.
The above calculations do not include the impact on Peter and Sue’s tax credits claim. But if they do claim tax credits, there will be an impact, as the taxable part of the pension also counts as tax credits income. This means that they could lose all of their tax credits for the 2020/21 year.
Tax credits for the 2021/22 year can be affected by an increase in income for 2020/21. This is because even if Peter and Sue’s income goes back to £22,000, they will be treated as having £24,500. This is because of what are called income disregards.
Scottish Child Payment
It was planned that at the end of 2020, the Scottish Child Payment would start. This has now been delayed due to the coronavirus. Now applications are expected to open by the end of 2020 with payments planned to start from 2021. This payment is being described in some places as a ‘child benefit top-up’. To be eligible, you will have to be in receipt of a qualifying benefit such as universal credit or any of its legacy benefits, such as working tax credit or child tax credit.
The Scottish Child Payment is separate from child benefit. However, drawing on your pension may mean that you lose entitlement to both. For example, if you lose entitlement to the other means-tested benefit on which your entitlement to the Scottish Child Payment relies, you will lose the Scottish Child Payment in addition to the means-tested benefit. If your adjusted net income exceeds £50,000, you may also lose some or all of your child benefit via the high-income child benefit charge, as discussed above.
We do not expect the high-income child benefit charge to be extended to apply to the Scottish Child Payment as well as child benefit.
See immediately below for further information on the impact of pensions decisions on state benefit entitlement.
You should check carefully the impact of your pension decisions on means-tested state benefits, such as universal credit and pension credit.
One-off or irregular sums taken from pensions could be treated as capital for the purposes of means-tested state benefits, and regular amounts taken from pensions are likely to be treated as income. Either capital or income treatment could have an immediate effect on your entitlement to state benefits, depending on your overall circumstances.
Local benefits like council tax reduction could also be affected.
It is not only the decision to take money out of a pension that could impact your current or future entitlement to means-tested state benefits. There could also be knock-on effects depending on how you use the money once you take it out. For example, if you were to decide to give pensions money away, for the purposes of state benefits (such as help with care costs) it might be considered that you deprived yourself of your pension savings.
We therefore recommend that you check your situation carefully before taking money out of your pension. There is some guidance on the government’s PensionWise website on state benefits impacts. The Department for Work and Pensions have also published a factsheet, available on GOV.UK – this considers how the pension flexibilities could affect entitlement to state benefits.
But be aware that it is not only those currently in receipt of state benefits who might be affected. A decision you make now could affect your future entitlement, though that is of course harder to judge as you have to make assumptions as to your future plans, needs and whether indeed the state benefits system will remain the same.
See our bereavement section, where we have a separate page on member pension schemes at death.
Can I pay into pensions again after taking money out?
As long as you are under the age of 75, are UK resident and have relevant earnings (or pay in less than £3,600 a year gross), you can still contribute to a pension after taking taxable amounts of money purchase pension benefits.
However, tax relief is limited to contributions of £4,000 a year gross where you have taken money purchase pension benefits. This is because of the money purchase annual allowance and is shown in the following example.
Note, however, that the money purchase annual allowance does not apply where you have only taken out a ‘pension commencement lump sum’ (otherwise sometimes known as your 25% tax-free cash), or where you have used the ‘trivial’ or ‘small pots’ pensions rules to fully cash in money purchase pension savings.
Example of being caught out by the money purchase annual allowance: Philip
Philip lives in England and has earnings of £20,000 in 2020/21, and no other income. He has a personal pension worth £35,000. He is 55 and, having developed some health problems, is no longer fit to continue his plumbing business. Philip has always been a keen photographer and thinks he can pursue this hobby as a new business, but he needs £15,000 to buy some more equipment to get himself up and running. He does not want to get into debt so is looking at accessing his pension. He plans to work for at least a further 10 years and is hoping, if successful, that he will be able to top up his pension savings again in future.
If Philip gets the money he needs out of his pension, his future pension contributions will be limited. If his new business venture is successful and he can then afford to pay more into his pension, he will find that his tax relief is restricted by the money purchase annual allowance. This means he can only now pay in £4,000 gross a year into his pension.
Note also that Philip will have to take out more than £15,000 to get that amount after tax. Based on other income of £20,000, he is a basic rate taxpayer so will pay 20% tax on any amount that is not treated as tax-free cash. He will also have to watch out for other tax and benefits consequences as discussed under the various questions above.
A further important point to note is that flexibly accessing money purchase pensions from one pot means you may have to notify any other pension providers you have savings with that you have triggered this money purchase annual allowance.
When you flexibly access pensions for the first time, the pension scheme administrator must provide you with a statement which should:
- confirm the date when you first flexibly accessed you pension;
- explain that the money purchase annual allowance will apply in respect of relevant future pension contributions;
- explain that you have obligations to notify other pension providers of the money purchase annual allowance having been triggered.
To expand on the third point above, your obligation is to notify, within 91 days of receipt of the statement, any other pension schemes of which you are an ‘accruing member’ that you have triggered the MPAA. This means that all other pension schemes of which you are an active or contributing member must be notified – not just money purchase schemes. The simplest way of fulfilling the obligation is to pass on a copy of the statement itself.
Further, you have an ongoing notification obligation to notify any new pension plan providers that you have triggered the money purchase annual allowance. If, for example, you get a new job and are automatically enrolled into the employer’s pension scheme, you would need to notify them – even if you are not likely to exceed the £4,000 contribution limit.
Technically, HMRC could charge you a penalty for failing to notify other pension providers that you have triggered the money purchase annual allowance. We are not aware of HMRC applying this in practice, but the amounts are significant – an initial penalty of £300, together with daily penalties of up to £60 per day for continued failure.
Do therefore try to avoid falling foul of this by:
- notifying any existing pension providers as soon as you can; and
- trying to remember to notify any new pension providers – particularly if you get are new job and are automatically enrolled as above.
Further information about this reduced money purchase annual allowance can be found on GOV.UK.
Where can I get further help?
You might need to get specialist advice on your tax, tax credits and benefits position – see our getting help page for more information. Some help is available for free for those on low incomes, but we also guide you how towards sources of paid professional advice if you can afford them.
If you are repaying a student loan and you have to fill in a Self Assessment tax return, taxable amounts that you take out of pensions can affect your repayments. Our Tax Guide for Students website explains.