5. Managing your pension
Your pension provider will send you a statement each year to tell you how much is in your pension pot. You can also ask them for an estimate of how much you’ll get when you start taking your pension pot.
What you see on your payslip
You don’t need to do anything to get tax relief at the basic rate on your pension contributions. There are 2 types of arrangements:
- net pay
- relief at source
Check with your employer or pension provider which arrangement your workplace pension uses. This determines what you’ll see on your payslip.
Your employer takes your contribution from your pay before it’s taxed. You only pay tax on what’s left. This means you get full tax relief, no matter if you pay tax at the basic, higher or additional rate.
The amount you’ll see on your payslip is your contribution plus the tax relief.
You won’t get tax relief if you don’t pay tax, for example because you earn less than the tax threshold.
‘Relief at source’
Your employer takes your pension contribution after taking tax and National Insurance from your pay. However much you earn, your pension provider then adds tax relief to your pension pot at the basic rate.
With ‘relief at source’, the amount you see on your payslip is only your contributions, not the tax relief.
You may be able to claim money back if you pay higher or additional rate Income Tax.
Tracing lost pensions
The Pension Tracing Service could help you find pensions you’ve paid into but lost track of.
Nominate someone to get your pension if you die
You may be able to nominate (choose) someone to get your pension if you die before reaching the scheme’s pension age. You can do this when you first join the pension or by writing to your provider.
Ask your pension provider if you can nominate someone and what they’d get if you die, for example regular payments or lump sums. Check your scheme’s rules about:
- who you can nominate - some payments can only go a dependant, for example your husband, wife, civil partner or child under 23
- whether anything can change what the person gets, for example when and how you start taking your pension pot, or the age you die
You can change your nomination at any time. It’s important to keep your nominee’s details up to date.
Sometimes the pension provider can pay the money to someone else, for example if the person you nominated can’t be found or has died.
Taking your pension
Most pension schemes set an age when you can take your pension, usually between 60 and 65. In some circumstances you can take your pension early. The earliest is usually 55.
Some companies offer to help you get money out of your pension before you’re 55. Taking your pension early in this way could mean you pay tax of up to 55%.
If the amount of money in your pension pot is quite small, you may be able to take it all as a lump sum. You can take 25% of it tax free, but you’ll pay Income Tax on the rest.
How you get money from your pension depends on the type of scheme you’re in.
Defined contribution pension schemes
You’ll need to decide how to take your money if you’re in a defined contribution pension scheme.
Defined benefit pension schemes
You may be able to take some money as a tax-free lump sum if you’re in a defined benefit pension scheme - check with your pension provider. You’ll get the rest as a guaranteed amount each year.