According to data from investment, life insurance and retirement specialist LV=, only 46% of non-retired UK adults with a pension say they understand the financial implications of how much tax-free cash they can take from pension savings.
The findings have been revealed in LV’s Wealth and Wellbeing Research Programme – a quarterly survey of 4,000 nationally representative UK adults, providing a unique snapshot of the UK’s financial and emotional health.
Tax-free cash refers to the part of a pension that can be withdrawn without an individual having to pay tax on it.
Currently, you can take out up to 25%, equating to a maximum of £268,275 as a tax-free lump sum from your pension without affecting your Personal Allowance. For many, this money could be strategically reinvested, or simply used to fund specific costs.
LV= Wealth and Wellbeing data has revealed 56% of men report understanding the financial implications of how much tax-free cash they can take from their pension savings, compared to 35% of women.
When those surveyed were asked whether they knew the precise amount of tax-free cash they could take out, 48% of men said they did, while only 29% of women said the same.
Moreover, a significant number of those surveyed said they were ‘unsure’, equating to 31% of men and 40% of women.
When it comes to utilising their tax-free entitlements, 31% of those surveyed stated they intend to take the standard 25% tax-free cash from their pension savings when the time is right, while 23% of respondents said they would be taking less.
Marc Perry, Advice and Consumer Channel Director at LV=, said:
“These findings highlight a critical need for improved, accessible financial and pension education and guidance surrounding people’s tax-free cash options. Without this essential knowledge, many UK adults risk undermining their retirement planning. With good information, individuals can make informed decisions about their financial futures.
“Understanding your tax-free cash options is key to making better-informed decisions about your pension savings. Not only can this provide a more secure future for you and your family, but it will also enable you to maximise your savings and avoid any unexpected tax surprises further down the line.”
“At LV=, we have a range of online support tools and personalised pension advice to help people plan for retirement with confidence.”
