How to use the money in your pension pot

How does tax work with this option?

You don’t pay tax on money when it’s in your pension pot or in drawdown. When you move money from your pension pot to drawdown, you normally get 25% of that money tax free. So if your pension pot has grown, you get 25% of that growth tax free, too. When you take money out of your drawdown pot it’s all taxable; you can’t take another 25% tax free. So, unless your total income is below your tax-free personal allowance, you will have to pay tax on money you take out of drawdown. HMRC sets the tax-free personal allowance every year. You can find the current rate at www.gov.uk. To learn more about how your pension income is taxed you will find ‘A guide to income tax and your pension’ in our online literature library at quilter.com/documents/

Early access due to ill health

If you are medically incapable of continuing your own occupation, you may be able to access your pension early. You will need to meet certain conditions every time you take tax-free cash and move money from your pension pot to your drawdown pot. For this reason regular tax-free cash is not an option before age 55.

Is drawdown always available?

Quilter offers the ability to use drawdown in all of the ways mentioned above. If you have pension pots elsewhere you will need to check with the providers to see what options they offer as even if they offer drawdown, they may have limits on how you can use it. If they don’t offer drawdown, you may be able to move your savings to a provider who does.

They may also offer another option called UFPLS, ‘uncrystallised funds pension lump sum’. This is where you can take a lump sum straight from your pension pot without moving money into drawdown. For each lump sum you take, you get 25% of it tax free. The rest of each lump sum is treated as income. Taking an UFPLS limits how much you can save into some types of pension pots in the future. This limit is called the money purchase annual allowance (MPAA). There’s more information about this limit on page 26.

When you move money from your pension pot into drawdown, you can also choose how your drawdown pot is invested

After you have taken your tax-free cash, the money you have moved into drawdown is invested to give it a chance to grow. However it’s really important to know that the investments in your drawdown pot may not grow or may go down in value. You will need to decide how you want this drawdown pot invested. You can do this with the help of a financial adviser or you can decide yourself. For instance, you could put your money in:

• higher-risk investments – this will give it more of a chance to grow but also means there is more of a chance the value can go down
• lower-risk investments – this gives it less of a chance to grow but means it is more likely to have a steadier value

Which investment is right for you will depend on how much money you’re investing, your attitude to risk, and when you’re looking to take money from your pension pot. With all investments, there’s a risk they might not do as well as you hoped. And you might live longer than you expected, so it can be difficult to be certain that you’ll have enough money to last the rest of your life. A financial adviser can help you work out which investments are right for you.

We always recommend that you obtain advice from a financial adviser if you move money into drawdown. If you do not then we are required to offer you three options:

• keep your money in your present investments
• move your money into other investments
• move your money into an investment

An investment pathway is an asset or group of assets that may be compatible with your retirement plans over the next five years, for which we offer four investment pathways.

This does not constitute financial advice from us, but it may help you reach a decision about the assets to choose.

We would provide details of how this works prior to you moving your money into drawdown.

What happens to your money when you die?

What happens to the money in your pension pot or drawdown when you die will depend on the rules of your pension. The rules will either say the pension

administrator will choose who your beneficiary is, that the money has to be paid to your estate or that you can choose to make a nomination that the pension administrator has to follow (called a binding nomination). If you make a binding nomination or the rules say it must be paid to the estate, this money will form part of your estate for inheritance tax purposes. If the rules say the

pension administrator will choose who your beneficiary is, this money will normally not form part of your estate for inheritance tax purposes. The rules of your Collective Retirement Account say that we will choose your beneficiary. When you opened your pension with us we will have asked you to nominate who you would like your money to go to when you die and we will take this into consideration when we choose your beneficiary. It’s really important that if you change your mind about who you want us to consider that you fill out a new form and update us.

Your beneficiary might have to pay income tax on what they get. This depends on how old you are when you die and how much you have in pension savings. The lifetime allowance is explained on page 26.

Key points

• Drawdown lets you take cash lump sums or a regular income, while leaving the rest of your money invested so it can grow. Because it’s invested, the amount of money in your pot can go down as well as up.
• All new drawdown arrangements are flexi-access – meaning there’s no limit to how much you can take each year. Once you start taking income, there’s a limit on how much you can save into some pensions.
• You can turn your Quilter pension into flexi-access drawdown at any time – but you don’t have to, and it’s wise to get advice and shop around (see page 24).

How to turn your money into a guaranteed income

You can use some or all of your money to buy a guaranteed, regular income from an insurance company. This is called an ‘annuity’.

Annuities can pay you an income for a certain number of years, or for life. They can be helpful if you’re looking for security, and don’t want the hassle of managing your money throughout retirement yourself.

However, once you buy an annuity you can’t usually change your mind. And an annuity won’t leave any money to your loved ones when you die, unless you choose a specific annuity product that does this. So, we’d recommend that you shop around to find the right annuity for you. Ideally, we’d recommend you get help from a financial adviser.

You can’t buy an annuity from Quilter, but you can buy one from another provider

We don’t offer annuities, but you can use the money in your Quilter pension to buy an annuity from another provider.

MoneyHelper has an annuity comparison tool you can use to compare annuity products: www.moneyhelper.org.uk/en/pensions-and-retirement/ taking-your-pension/compare-annuities.

There are different types of annuities and different add-ons you can choose, for instance, you can choose an annuity that pays your spouse or civil partner an income after you die, or an annuity that increases with inflation. So, make sure you speak with a financial adviser before making a decision.

If you choose an annuity, the income you get will be based on your personal circumstances

Insurers may take your personal circumstances into account to decide how high an annuity income they can promise to pay you. Factors such as where you live, what you do,

and whether you’ve had any serious illnesses help insurers determine how long you’re likely to need an income for. It’s worth shopping around for an annuity, because all of these factors might mean you get a higher income. If you’ve worked in certain manual jobs, for instance, you might get a higher income than someone who hasn’t.

There are different ways to customise an annuity

1. Choose whether your income lasts for the rest of your life or for a set number of years

You can choose to be paid an income for as long as you live (known as a lifetime annuity) or just for a certain number of years (known as a fixed-term annuity). With a fixed-term annuity, you get a lump sum at the end of the term. This lump sum will be smaller than the one you used to buy the annuity.

2. Choose whether your income grows with inflation (the rising cost of living) or stays the same

You can choose whether you want your annuity to stay at the same level or to increase each year.

• Stay at the same level: a level annuity pays you the same amount of income for the entire time you have it. It usually gives you more money to begin with than an annuity that increases each year. But a level annuity might buy you less in the future as prices rise with inflation. For example: if inflation is 3% a year, £10,000 will be worth the same as £7,374 in 10 years.
• Increase each year: an escalating annuity will normally start paying a lower level of income and will gradually build up over the You can choose to increase it by a fixed amount each year (for example 3% or 5% a year). Or you can ask for it to increase in line with inflation – specifically the Retail Price Index (RPI).
• This is useful if you’re concerned about rising prices and want your income to match the current cost of living.

3. Choose whether you want to leave an income for your spouse or civil partner when you die

A single-life annuity pays you an income until you die or until the fixed term runs out. A joint-life annuity pays you an income, and when you die it pays a smaller income to your spouse or civil partner. If you want money from a joint-life annuity to go to another dependant when you die, a child, for instance, you will need to check with the provider to see if their product does that.

A joint-life annuity pays a lower income to you than a single-life. That’s because the provider will probably need to keep paying it for longer.

4. Choose whether you want to leave a lump sum for your children or other family members when you die

You can choose an annuity that leaves a lump sum for your children or other family members when you die. This is called an ‘annuity protection lump sum death benefit’.

The lump sum your family would get is usually the amount of money you used to buy the annuity, minus any income you’ve been paid.

If you die before 75, the lump sum is tax free. If you die aged 75 or older, your beneficiaries might have to pay income tax on it, depending on their tax bracket and the amount of money they get paid.

With this option, the annuity income you get will be less than you’d get with a standard annuity that doesn’t pay out a lump sum.

5. Choose whether to guarantee your annuity, in case you die within the first few years of taking it

You can choose an annuity with a guaranteed period. This means your annuity guarantees to pay an income for a certain number of years. So even if you die during that time, your income will continue to be paid to your partner, children or other dependants. This might not be necessary if you’ve taken out a joint-life annuity.

Bear in mind that the longer the guaranteed period you choose, the lower your regular annuity income will be.

6. Choose whether to link your income to investments to give it a chance to grow

You could consider an investment-linked annuity, which invests in things like stocks and shares. This means you could grow your income if your investments do well. But it also comes with the risk that your investments could go down, which would reduce your income. This option is usually only recommended to people who are confident investors and have a financial adviser. If you choose this type of annuity you’ll be limited to how much you can save into some types of pension pots in the future. There is more information about this limit on page 26.

How does tax work with this option?

• If you’re using money from your pension pot to buy an annuity

If you’re taking money out of your pension pot to buy an annuity, you’re normally entitled to take 25% of that money as a tax-free lump sum. This would reduce the amount of money you have left to spend on your annuity though, so it would give you a smaller income. For instance, if you were using £80,000, you could take a quarter of that (£20,000) tax-free, and then use the remaining £60,000 to buy an annuity. It’s worth thinking about whether it’s more useful to have a lump sum now, or to secure a higher regular income for the future.

Once you’ve bought your annuity, the money you get from it is taxed as part of your income.

• If you’re using money from drawdown to buy an annuity

If you’re using money from drawdown to buy an annuity, you’ll already have had the opportunity to take your

tax-free element. You’ll have had this opportunity when you were first moving the money from your pension pot into drawdown.

Once you’ve bought your annuity, the money you get from it is taxed as part of your income.

What happens to your money when you die?

An annuity won’t leave any money to your loved ones when you die, unless you choose a specific annuity product that does this. There’s more information about this in points 3, 4 and 5 above. Because an annuity stops paying out when you die, there’s a risk that, if you die much earlier than you expect to, your annuity won’t have paid you much money at all.

Key points

• An annuity is a guaranteed income you can buy from an insurance company. It’s paid for a fixed period of time or for life.
• You can customise your annuity to suit you. You can choose whether your income increases over time or stays the same, whether it’s just for you or whether it leaves something for your family when you die. The options you choose will affect how much income you get from your annuity. You can shop around to get different quotes and choose one that’s best for you.
• Quilter doesn’t offer annuities, but you can get one from another company. Make sure to get financial advice and shop Once you buy an annuity, you can’t usually change your mind.

How to mix and match your options

You don’t have to use the money in your pension pot all in one go. You can use it as and when you need to – and this is the case whether you have just one pension pot or multiple pots. This is often referred to as ‘phased retirement’.

When you do choose to take money from your pension pot, you have a number of options:

• Taking it all in one go as a cash lump sum
• Taking it a bit at a time as drawdown
• Turning it into a guaranteed income by buying an annuity

You can choose just one option or mix and match some or all of these options.

You can mix and match your options

For instance, you could take a 25% tax-free lump sum and then use some of what’s left to buy an annuity and put the rest in drawdown. The annuity would give you some guaranteed income. The drawdown would give you some flexibility, so you could take more income when you need it and less when you don’t. You’d need to remember that the money in drawdown is invested, so its value can go up and down, and if you take a large income it could run out.

You can change what you do over time

If you put all of your pot into a lifetime annuity, you probably can’t change what you do in the future. But if you leave it invested, buy a fixed term annuity or put it into drawdown, you can change your mind later. For instance, you could put money into drawdown, take an income from it or not, and then later on use the money to buy an annuity. People sometimes do this when they get older and decide that security has become more important to them than the flexibility they wanted when they first retired. You could even decide to take it all out of drawdown as cash, but if there’s a lot of money in your drawdown account, you could get a big tax bill too.

Or you can choose not to do anything at all

You can leave your money where it is and think about it later. You can leave your pension pot with Quilter where it is for as long as you like. Most pension providers let you do this. And, the longer you leave it, the more time it has to grow potentially.

Here’s an example of how one person might mix and match their options.

Here’s an example of how one person might change their options over time.

Step 3: Get help or advice and take the next steps

The decisions you make about your pension pot will affect your income for the rest of your life. To help you think about what’s best for you, it’s always wise to talk through your particular situation with a financial adviser.

Income tax guide

To learn more about how your pension income is taxed you will find ‘A guide to income tax and your pension’ in our online literature library at quilter.com/documents/

Get financial advice

A qualified financial adviser who is registered with the FCA can give you personalised advice about what to do with your pension savings. You should always check that your adviser is registered with the FCA as this will give you and your money protection if things ever go wrong.

An adviser will assess your whole financial situation. They’ll look at all the pension arrangements you have, along with any other income and savings. They’ll also discuss with you the sorts of things you plan to do with that money in retirement. Then they’ll talk you through your options and recommend the best products and providers for you. You’ll have to pay for

their advice.

Some advisers are independent financial advisers. They can look at all the providers when they’re finding the best products for you.

Some advisers are restricted financial advisers. They’ll only look at a certain number of providers when they’re finding the best products for you. They’ll explain any restrictions.

If you haven’t got a financial adviser, you can access a choice of advisers from Quilter or the whole of market at quilter.com/find/

Get free help and guidance Financial advice is where you are given a recommendation based on your circumstances, needs and goals. If you are not using a financial adviser, you can get guidance instead. Guidance will give you information to help you make your own decision.

You can get guidance from:

Pension Wise

Pension Wise is a free and impartial service from MoneyHelper, a government backed organisation.

The service helps you understand what you can do with your pension money.

They offer telephone or face-to-face appointments with highly-trained professionals. You can also explore you pension options on their website.

You’ll get:

• Guidance on how best to make the best use of your money
• Information about tax when taking money from your pension
• Tips on getting the best deal, including how to compare products, get financial advice and avoid scams.

9 out of 10 people who have had a Pension Wise appointment would recommend it to friends and family, so book yours now.

Phone number: 0800 138 3944

Website: www.moneyhelper.org.uk/pensionwise

MoneyHelper

MoneyHelper is here to help, so you can move forward. Here to cut through the jargon and complexity, explain what you need to do and how you can do it. Here to put you in control, with free, impartial help that’s quick to find, easy to use and backed by government.

Whatever your circumstances or plans, MoneyHelper is on your side. Online or over the phone, you’ll get clear money and pensions guidance, and pointers to trusted services,

if you need more support.

Open to everyone, MoneyHelper is helping people to clear their debts, reduce spending and make the most of their income. To support loved ones, plan ahead for major purchases and find out about entitlements. To build up savings and pensions, and know their options.

If you’re thinking about drawing your pension, MoneyHelper is here. Here to listen and give free, impartial, trusted guidance. Based around you and backed by government.

For money help all in one place that’s free to use, just get in touch with MoneyHelper.

Phone number: 0800 011 3797

Website: www.moneyhelper.org.uk

Shop around to find the best product for you

People often don’t realise they can shop around for the best retirement income deals. They tend to stay with the same provider. But you might be able to get a better deal by shopping around.

If you have a financial adviser, they can shop around for you

A financial adviser can usually shop around the market for the best products for you. If you don’t want to use a financial adviser, you can shop around for products yourself. Bear in mind some product providers will only sell products through a financial adviser.

If you shop around on your own, here are some things to look for

To help you research and compare different products and pension providers, you can ask questions like:

• How will they let you use the money that you move over to them?
• How frequently will they let you take your money?
• How much will the charges cost for things like the product, the administration, the funds and taking money out of your pension?
• How can you invest your money with this provider?

You can also ask different providers for a drawdown projection or an annuity quote so you can compare them.

While the most important thing is that you find an option that gives you what you want from your retirement income, you might also want to consider some non- financial factors like:

• How good the provider’s customer service is
• What tools they have online to help you
• How easy their website is to use
• Whether their call centre is open at convenient

Here’s some information to have to hand

When you’re shopping around, the providers you look at will probably need a few details from you to answer your questions.

So, it’s a good idea to have this information to hand:

• The value of all your pension pots
• If you’re thinking about taking 25% tax-free cash
• Whether you’re thinking about taking any small pots as cash
• If you’re married, have a partner or any dependants
• If you’re buying an annuity, if you have any lifestyle choices (like smoking) or health conditions that may affect the amount of income you can get
• If you’re buying an annuity, what kind of annuity you want (see page 18 for all the options)
• Your personal

Watch out for pension scams

Pension scams are on the rise, and scammers posing as financial advisers are using increasingly sophisticated tactics.

Scammers can seem professional and knowledgeable with websites that look credible. The websites might have customer reviews and product brochures that look real.

They can approach you out of the blue with investment proposals that seem very good value. However you could end up invested in high-risk investments like overseas property, renewable energy bonds, forestry, storage units or your money is simply stolen outright.

Be on the alert for any of these warning signs:

• Contact out of the blue about your pension – cold calls are illegal in the UK
• Free pension reviews – professional financial advice is never free
• The promise of high or guaranteed returns – if it sounds too good to be true, it probably is
• The offer to access your pension before you’re 55 – you could be left with a tax bill for taking your money before the minimum pension age, or you could lose that money, or both
• Pressure to act quickly – scammers might rush you,

so you don’t have time to realise it’s a scam. Make sure you don’t rush making a decision

• Unusual and complicated investments that don’t make it clear where your money will end up – if you don’t understand how your money is invested, it’s probably not a good idea
• Involvement from lots of different parties – all taking a fee and some who may be based overseas

If you’re concerned about whether the person who has approached you is a scammer, the first step is to check if their name and firm is registered with the Financial Conduct Authority (FCA).

Visit the FCA’s website for more information on how to spot a scam at www.fca.org.uk/scamsmart

If you suspect a scam, report it

Report to the Financial Conduct Authority (FCA)

By contacting their Consumer Helpline on 0800 111 6768 or using the contact form at www.fca.org.uk/consumers/report-scam-us

Report to Action Fraud

On 0300 123 2040 or at www.actionfraud.police.uk

If you’re in the middle of a transfer

Contact your pension provider immediately and then get in touch with MoneyHelper on 0800 011 3797 or at www.moneyhelper.org.uk

What to do next

There’s no need to do anything until you’re ready. In the meantime, keep this guide somewhere safe in case you want to refer to it.

When you’re ready, check you’re not going to exceed any allowances

The lifetime allowance

This is a limit on the amount you can build up in all of your pension savings put together. This limit doesn’t include your state pension, though.

For the 2023/24 tax year, the lifetime allowance is

£1,073,100 however if you have previously applied for it, you might have a protected lifetime allowance . Whenever you use money in your pension pot – to take a tax-free lump sum, to move money into drawdown, or to buy an annuity, you use up a bit of your allowance.

If the amount of money you take out is over your remaining lifetime allowance limit, there will be no charge on the excess if you move your money into a drawdown account. However there will be income tax charged on any money you subsequently take out. If you take your excess as a lump sum, you will pay income tax on that lump sum. If you’re taking a tax-free cash lump sum, you can only do this if you’re within your lifetime allowance limit.

If your savings aren’t checked against the lifetime allowance when you’re alive, they’ll be checked as they’re passed on to your beneficiaries.

You can find out more at www.gov.uk/tax-on-your-private- pension/lifetime-allowance

The annual allowance

There’s a limit on how much money you can save or build up in all of your pension savings each year without having a tax charge. This is called the Annual Allowance. Normally the Annual Allowance is £60,000 but it could be a lower amount if you take income in a way that is considered ‘flexible’ or if you have a large ‘income’. These lower Annual Allowances and how they work are briefly explained below.

If you go over your limit, you’ll have to pay extra tax. So you’ll need to think about this if you’re putting money in at the same time as taking it out, which might be the case if you’re continuing to work while taking some of your pension.

The money purchase annual allowance

Your Quilter pension is a money purchase pension. A money purchase pension is a pension pot where the money that is saved into it is invested and the value depends on what those investments are worth. This brochure describes the way you can use the value of your money purchase pension pot.

When you take your pension pot all in one go (page 12), take money from your flexi-access drawdown (page 13), take an uncrystallised funds pension lump sum (page 15) or an investment linked annuity (page 19) you are considered to have flexibly accessed your pension. At this point, the amount you can save into your money purchase pension without having a tax charge is £10,000. You may still be able to build up more savings than £10,000 without a tax charge if you have a defined benefit pension.

A defined benefit pension is one where you will receive a pension income for life, based on your earnings and the amount of time you have worked for the employer who offers that pension.

The tapered annual allowance

If you have a high ‘income’ your annual allowance might be reduced depending on the amount of ‘income’ you have. The ‘income’ for this purpose takes into account your taxable income for the year and the amount of pension savings made in the same tax year. Working out whether it applies to you can be complicated so you should seek financial advice or guidance if you are not sure.

To get the ball rolling, speak to your financial adviser

Whenever you are ready, you can get the ball rolling by talking to your financial adviser, getting guidance from Pension Wise or getting in touch with us on Telephone: 0808 171 2626

Email: ask@quilter.com

You can also see details of your pension and get a valuation without picking up the phone. Just visit our online Customer Centre: quilter.com/login/

quilter.com

Please be aware that calls and electronic communications may be recorded for monitoring, regulatory and training purposes and records are available for at least five years.

Quilter is the trading name of Quilter Investment Platform Limited which provides an Individual Savings Account (ISA), Junior ISA ( JISA) and Collective Investment Account (CIA) and Quilter Life & Pensions Limited which provides a Collective Retirement Account (CRA) and Collective Investment Bond (CIB).

Quilter Investment Platform Limited and Quilter Life & Pensions Limited are registered in England and Wales under numbers 1680071 and 4163431 respectively.

Registered Office at Senator House, 85 Queen Victoria Street, London, EC4V 4AB, United Kingdom. Quilter Investment Platform Limited is authorised and regulated by the Financial Conduct Authority. Quilter Life & Pensions Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority. Their Financial Services register numbers are 165359 and 207977 respectively. VAT number 386 1301 59.