The best choices for your Tax-Free Cash

You may have plans for the tax-free cash that you can take from your pension. For instance, you may look to reduce or pay off your mortgage, give a helping hand to a family member or treat yourself to a new car.

However, some take the lump sum just because it's available, without having considered what they may use it for. This means the money can often end up sitting in a high street bank account with its real value dwindling over time.

After all, high street banks often pay some of the lowest rates of interest.

When you’ve spent decades investing hard earned money to build up your pension pot it’s crucial that you make the most of it when you take the money out. The wrong decisions could cost you.

This isn't personal advice. You can normally access your pension from age 55 (rising to 57 from 2028). If you're not sure what's right for you, please ask for advice. Tax rules can change, and benefits depend on your circumstances.

Get over double your interest vs big high street banks

In retirement, we believe you should hold the equivalent of 1 to 3 years’ essential expenses in cash in case of emergencies. On top of this we also recommend keeping enough in cash to cover any planned lump sum expenses over the next 5 years.

With an Active Savings Account you can get over double the interest vs the big high street banks.

In fact, you could have got a market leading rate every day this year through Active Savings.

You get consistently great rates without the hassle. It’s the only savings account you’ll ever need. With one account, you can grow and protect your cash, mixing easy access, fixed-term savings and even tax-free Cash ISAs from multiple banks and building societies.

New rates are added and withdrawn all the time. Check to see if you can make the most of your cash today. Plus, register and open an Active Savings Account by 26 September and you could get cashback. Terms apply.

Open an Active Savings Account

Find out more about Active Savings

Tax-free growth on your tax-free cash

Your pension should be the money you access last. Once you take money out of a pension it could become liable to inheritance tax. You also can’t put the money back in, losing future tax-free growth.

If you’ve taken your tax-free cash already, but now realise you don’t need the money within the next 5 years, consider re-investing it inside a Stocks and Shares ISA.

Investing usually gives you a higher long-term return compared to cash savings if you are willing to accept the additional risks. You can put up to £20,000 into ISAs each tax year. And any growth will be free of UK income and capital gains tax.

Unlike cash, investments will rise and fall in value, and you could get back less than you put in.

Open or top up a Stocks and Shares ISA

Find out more about Stocks and Shares ISAs

Get tailored advice from someone you can trust

Retirement is one of the most popular times to get financial advice. It's vital to make the right choices at such a crucial stage in your life.

For over 40 years we’ve helped people save and invest with confidence.

A financial adviser can help you to create a robust budget and income strategy. They'll look at all your cash savings, investments and pension income options to create a plan for making your money last throughout retirement.

Our Chartered Financial Planners status signifies our dedication to the highest professional standards. We prioritise ethical conduct, prioritise your interests, invest in ongoing development, and support initiatives benefiting society and our profession.

Getting retirement advice from an expert you can trust starts with one call.

You won’t get personalised advice on the call. You’ll talk through your financial situation and what we offer so you can decide if advice is right for you. If our service meets your needs, we'll connect you with a financial adviser within three working days for your initial meeting.

Book your free call

Find out more about retirement advice

Alternatively, Pension Wise is a free, impartial government service for anyone aged 50 or over, with a UK based personal or workplace pension. Find out more about Pension Wise.