How withdrawing from your savings pot can hit your cash lump sum at retirement

EXPLAINER | How withdrawing from your savings pot can hit your cash lump sum at retirement

If you access your cash lump sum before retirement, you may reduce or lose the tax benefit you could enjoy at retirement.

If you have retirement savings made before 1 September 2024 in your vested pot, you can take one third of that in cash at retirement. If you withdraw the savings from your savings pot before retirement, you effectively reduce your pot of cash at retirement.Nothing in this pot can be taken in cash. It must be used to buy a pension or annuity that will pay you a monthly income in your retirement.

The key to accessing this tax-free benefit is that if you do not have any cash to withdraw at retirement you cannot use it and if you have reduced your cash benefit by making withdrawals from your savings pot, you may reduce the portion of this benefit you enjoy.If you take money out of your savings pot before retirement, you pay tax on it at your marginal tax rate. If you take money from your savings pot when you retire, it is taxed on the and you could get some, most or all of it tax free .

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