Pot your tax-free pension

DECIDING when to take your pension's tax-free cash is never simple, but the rumour mill has made it even trickier.

- By Harvey Jones

POT LUCK: Think carefully

With reports suggesting Chancellor Rachel Reeves could cap the 25% tax-free allowance in this month's Budget, many savers have rushed to withdraw lump sums before any changes are confirmed.

That may yet prove unfounded, but the decision has already been made by thousands who dare not risk missing out. Under today’s rules, savers can take up to £268,275 tax-free, the equivalent of a £1.07million pension pot. Cutting that cap to, say, £100,000 would hit anyone with more than £400,000 saved.

Nick Nesbitt, head of private client at Forvis Mazars, said he had seen “a real uptick” in clients accessing pension cash early. “Many are willing to take a 40% tax hit on the income they are drawing, if they can pass it down”

Taking the cash is only half the story. What matters is what you do with it.