If you start taking money out of your pension savings while you’re still paying in to them, the money purchase annual allowance – currently £10,000 a year – could affect you. This means the total amount you and your workplace can pay into your pension savings and still get tax relief goes down to £10,000 a year.
As a basic guide, this allowance won’t usually apply if you:
- buy an annuity to give you an income for life – either one that increases, or that stays at the same level
- put your pension savings into a drawdown arrangement, but don’t take any income
- turn a small amount of pension savings, worth less than £10,000, into cash.
It could apply if you:
- take some or all your pension savings as cash
- put your pension savings into a drawdown arrangement and start taking income
- buy the kind of annuity where your income could go down as well as up.
You should check how these rules apply to you before you start taking money out of your pension savings.
NOW: Pensions doesn’t offer annuities or drawdown products.
Find out more about the annual allowance for pension contributions.