Your pension continues to grow tax-free, potentially providing more income once you access it. If you want to build up your pension pot further, you can continue to receive tax relief on pension savings of up to £40,000 each year (tax year 2019/20), or 100% of your earnings if you earn less than £40,000, until age 75.
The longer you delay taking your pension, 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). Your pension scheme or provider will inform you if there are any restrictions or charges for changing your retirement date, and the process and deadline for telling them. There may also be a loss of any income guarantees (for example, a guaranteed annuity rate) by delaying your retirement date.
Less risky funds
As the value of pension pots can rise or fall, it is essential to review where your pot is invested as you move towards the time you want to retire and arrange to move it to less risky funds if necessary.
In the event that you die before age 75, your untouched pension pots can pass tax-free to any nominated beneficiary, provided the money is paid within two years of the provider becoming aware of your death. If the two-year limit is missed, the money will be added to the beneficiary’s other income and taxed at the appropriate rate(s).
If you die after 75 and your nominated beneficiary takes the money as income or as a lump sum payment, they’ll pay tax at their appropriate rate(s). This means that the money will be added to their income and taxed in the normal way.
If the total value of all your pension savings when you die exceeds the lifetime allowance (currently £1,055,000 tax year 2019/20), further tax charges will be payable by the beneficiary.