You’ll pay up to 55% tax on payments from your pension provider if they don’t follow the tax rules for getting money from a pension.
These are called ‘unauthorised payments’.
Unauthorised payments include:
- the part of a tax-free lump sum that’s worth more than 25% of your pension pot
- any payments before you’re 55, unless you have the right under your pension scheme
- a ‘trivial commutation’ lump sum worth more than £30,000
- regular payments after you’ve died
Some companies advertise personal loans or cash advances if you take your pension early. These payments are unauthorised and you have to pay tax on them.