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Impact on tax and entitlements

There are various implications no matter which option you choose when you access your pension pot.

Your tax bill

Whether you buy an annuity or take a lump sum payment, the amount you receive (minus any tax-free amount) will be added to any other income you have, such as your State Pension.

If the total amount is over your personal allowance, you will have to pay tax on it. You may even be pushed into a higher than normal tax band, especially if you’re thinking about taking a large lump sum from your pension pot. You could go from paying no tax to being taxed at 40%.

Your welfare benefits

If you’re currently claiming any means-tested benefits, you may find you’re no longer eligible for them if your income and/or savings increase.

Any benefits you could claim in the future may also be affected. There have been various news stories about people potentially spending their entire pension pots in one go, leaving them with no private pension at all. Worse still, they may then find themselves unable to claim any means-tested benefits such as Pension Credit if the government believes they deliberately spent their money in order to claim these benefits. They could find themselves left only with their State Pension to live on.


With the new pension rules have come new scams. You risk losing some or even all of your hard-earned pension pot if you fall prey to a fraudster.Learn how to spot a pension scam

Getting further help

You can visit the government’s Pension Wise website for free and impartial guidance.

You can also get help online, by phone with the Pensions Advisory Service or by face-to-face appointments at certain Citizens Advice Bureaux. The phone or face-to-face guidance will last around 45 minutes, and you’ll be given a summary document afterwards to help you deal with your pension finances. You won’t be given specific advice or recommendations.

If you need more detailed advice, find a specialist financial adviser using the Money Advice Service's online independent adviser directory.

For more information: Call Age NI Advice: 0808 808 7575

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