Tom Selby

NHS pensions in England and Scotland are legally separate defined-benefit schemes, so the reader should receive separate communications and statements rather than having a single investment pot. NHS workers aged 55 and over can generally take a tax-free lump sum early, but this reduces their promised pension income, typically by £1 of annual pension for every £12 taken as a lump sum. The NHS Business Services Authority is the recommended contact for information about the English pension, estimates and benefit statements, and professional financial advice is advised before making an irreversible decision.

A serving soldier asks how the Armed Forces Pension Scheme works if their post is cut before they reach the normal pension age of 60. Tom Selby explains that serving personnel build new benefits under AFPS 15, a career-average defined-benefit scheme accruing at 1/47th of pensionable earnings each year. Those with at least 20 years of service who are aged 40 or over may qualify for an early departure payment, including a bridging income and a lump sum, without an actuarial reduction to the pension payable from state pension age. The main pension can also be taken from age 55, but doing so applies an actuarial reduction; part of the reduced pension may be exchanged for a tax-free lump sum at a rate of £12 for each £1 of annual pension surrendered. Both the early departure payment after age 55 and the main pension are protected against inflation.

The UK state pension costs about £150 billion annually and could rise from 5% to around 9% of GDP over the next 50 years without policy changes. The Office for Budget Responsibility projects that replacing the triple lock with an earnings link could limit future costs, while assumptions that the pension age will rise to 68 between 2037 and 2039 have renewed uncertainty despite the Government saying no formal decision has been made. The article argues that the triple lock should be scrapped alongside a clear plan to raise the state pension age, warning that protecting generous increases for current pensioners risks placing an unfair burden on younger generations.

A pension-sharing order can transfer part of a pension to an ex-spouse or civil partner. For defined contribution pensions, the transferred amount can generally be accessed from age 55, rising to 57 in 2028, with up to a quarter potentially tax-free and further withdrawals taxed as income. Defined benefit pensions are more complex because the order is based on a cash equivalent transfer value and may create either a new defined benefit entitlement or a defined contribution pot. NHS pensions generally cannot be transferred out after a sharing order; instead, the former partner receives an internal pension credit and a defined benefit income at the scheme’s normal retirement age. In that situation, flexible drawdown is not available, and the scheme’s rules determine the tax-free lump sum and taxable income.

A teacher who applied to receive their pension at age 60 in July 2024 is still waiting because of delays affecting the Teachers’ Pension Scheme. The likely cause is the requirement to resolve how members’ 2015–2022 benefits should be calculated after public-sector pension reforms and subsequent legal challenges. The backlog reportedly affects tens of thousands of members, and benefits may not be paid until members choose between final-salary and career-average calculations for that period. The recommended escalation routes are a formal complaint to the scheme, Internal Dispute Resolution and, if necessary, the Pensions Ombudsman, although these processes may take time and could potentially result in compensation.

An NHS pension member plans to claim roughly £15,000 a year from February 2027 while continuing to earn about £40,000 in employment, alongside a tax-free lump sum of approximately £110,000 to £120,000. The lump sum will not count as taxable income when HMRC assesses eligibility for the £12,570 personal allowance. Taxable salary and pension income do count, but the reader’s stated income is well below the £100,000 threshold at which the allowance begins to taper, so the lump sum should not create an additional tax liability or cause the loss of the personal allowance.

SERPS was part of the former earnings-related state pension and cannot be withdrawn separately before state pension age. The £12,000 and £7,000 pots are more likely defined contribution pensions built through contracting out, which can generally be accessed from age 55, with 25 per cent tax-free and the remainder taxed as income. Accessing the £12,000 pot would trigger the money purchase annual allowance, reducing future tax-relieved pension contributions from £60,000 to £10,000. The wife may be able to take her pot as a small-pot lump sum while retaining the £60,000 annual allowance. Neither withdrawal should directly reduce their state pension, which depends mainly on their National Insurance records; they should check their state pension forecasts for confirmation.

A worker unhappy with the administration of their defined benefit pension is advised not to transfer out solely because of delayed payments or difficulties obtaining pension quotes. Defined benefit schemes provide an inflation-protected retirement income based on salary, accrual rate and years of membership, making them increasingly rare and valuable. Members can complain to the Pensions Ombudsman if administrative problems are not resolved. Transfers may be possible from funded schemes by requesting a cash equivalent transfer value, while most unfunded public-sector schemes do not allow transfers; regulated financial advice is legally required for transfer values of £30,000 or more. An alternative pension with employer contributions may be available, but it is unlikely to match the value and security of the existing scheme.

Market volatility linked to the conflict involving Iran may temporarily reduce the value of defined contribution pension investments, but savers are generally advised not to panic or attempt to time the market. Diversification and a review of investment risk are sensible, while people using pension drawdown may need to reassess withdrawals to reduce the risk of exhausting their funds. Defined benefit pensions and state pension entitlements should not be directly affected, although the state pension could face longer-term pressure if defence spending rises significantly.

Planning for retirement care costs is difficult because the need for care, its duration and whether it will be delivered at home or in a care home are uncertain. Increasing pension contributions can help, with basic-rate tax relief automatically added and additional relief available to higher-rate taxpayers, subject to annual and earnings-based contribution limits. Contributions can be increased through a workplace pension or a SIPP, but employer-matching benefits should be maximised first. In England, people with assets above £23,250 generally pay the full cost of care. Immediate needs annuities and equity release may help fund those costs, but independent financial advice is essential because the options are complex.

Self-employed UK workers do not benefit from automatic-enrolment workplace pensions, so they must arrange retirement saving themselves. A Lifetime ISA allows people aged 18 to 39 to contribute up to £4,000 annually and receive a 25 per cent government bonus, with tax-free withdrawals for a first-home deposit or from age 60, but early withdrawals usually incur a 25 per cent charge. Personal pensions offer equivalent basic-rate relief, additional relief for higher- and additional-rate taxpayers, and may allow limited-company directors to make tax-efficient employer contributions. The LISA may suit basic-rate taxpayers, while pensions generally offer greater benefits to higher-rate taxpayers; a conventional ISA can also be used, though it has no upfront bonus. These products can be combined according to individual circumstances.

Private pensions can generally be accessed from age 55, but the normal minimum pension age is scheduled to rise to 57 in April 2028. People with a protected pension age of 50 may retain earlier access, although transferring to another provider could jeopardize that protection. Transitional rules remain unclear for people aged 55 to 57 who have partially accessed their pensions, particularly those using phased drawdown, with further government clarification expected in early 2026. Once eligible, up to 25% of a pension pot can usually be taken tax-free, subject to the £268,275 lifetime maximum; additional withdrawals are taxed as income. Accessing a pension early can exhaust savings sooner and may trigger a reduced money purchase annual allowance.

A former UK resident now living in Ireland can use the UK government’s pension tracing service to identify workplace pension schemes, although it only supplies the administrator’s contact details and the individual must follow up. Private services such as AJ Bell’s free Pension Finder may also help. A government-backed Pensions Dashboard is expected in 2027. Consolidating defined-contribution pensions could reduce charges and simplify management, but non-UK residents must confirm that a provider will accept them and consider currency risk, valuable benefits, exit fees and the additional advice requirements for transferring defined-benefit pensions worth £30,000 or more.

UK pension savers can generally withdraw up to 25 per cent of their pension pot tax-free, usually capped at £268,275. The minimum access age for defined contribution pensions will rise from 55 to 57 in 2028, while defined benefit schemes may offer tax-free cash in exchange for reduced retirement income. Rachel Reeves said the government would not reduce tax-free cash at the latest Budget, but declined to support AJ Bell’s proposed Pension Tax Lock guaranteeing the rules for the rest of the parliamentary term. Further changes therefore remain possible, and savers are advised not to access their pensions early because of speculation, since taking tax-free cash is irreversible and may undermine long-term retirement plans.

Buying an annuity before 2028 solely to lock in currently high rates is discouraged because annuity rates depend on unpredictable interest rates, and insurers already price in market expectations. Taking an annuity earlier generally produces a lower income because payments are expected to last longer. The reader should review and gradually reduce investment risk in their pension over the five to ten years before retirement, checking that the provider’s assumed retirement date is correct. An annuity can be combined with drawdown, and the eventual purchase should consider inflation protection, joint-life benefits and guarantee periods, not just the headline rate.

From April 2027, unspent pension funds will generally be included in an individual’s estate for inheritance-tax purposes. Gifts may reduce the eventual tax bill, including gifts of up to £3,000 a year, small gifts of up to £250, unlimited gifts that fall outside inheritance tax if the giver survives seven years, and regular gifts made from surplus income. However, the pension holder must first ensure they have enough money to fund retirement, and gifting through trusts or into another person’s pension or ISA can involve complex rules. Professional regulated advice and careful record-keeping are recommended.

The UK state pension is legally classified as a benefit and can be changed by government, despite being linked to National Insurance records. It operates on a pay-as-you-go basis rather than through individual contributions saved in a personal fund. While outright abolition, means-testing, or immediate reductions are considered highly unlikely, future governments may alter the triple lock or accelerate increases to the state pension age because of the rising cost of an ageing population. Any significant changes are expected to be announced well in advance, meaning people close to retirement are unlikely to be affected.

Downsizing does not directly count as income or capital for pension credit, but the cash released from selling a property can increase savings and reduce or eliminate entitlement. Savings above £10,000 are treated as generating £1 of weekly income for every £500 held above that threshold. The example given shows that £30,000 in savings could add £40 to assessed weekly income, taking a single pensioner with £220 in state pension income above the eligibility threshold. Giving away money to preserve entitlement may be treated as deliberate deprivation of assets by the Department for Work and Pensions, although legitimate explanations such as routine gifts, charitable donations and debt repayment must be considered. Keeping records of financial decisions is advised.

Universal Credit is generally available only until a person reaches state pension age, at which point it stops and is not automatically replaced. The claimant must apply separately for Pension Credit, which can be claimed up to four months before reaching state pension age. Eligibility and the amount awarded depend on household income, state and private pensions, savings, residency and whether the claimant is part of a couple. Pension Credit can also unlock additional support such as free NHS dental treatment and free TV licences for people aged over 75.

A 63-year-old cannot transfer a Cash ISA directly into a workplace pension but can withdraw the ISA tax-free and use the money as a pension contribution. This may provide tax relief, increase tax-free retirement cash and allow withdrawals to be managed for tax efficiency, but contributions are limited by relevant earnings and annual allowance rules. The annual allowance is generally £60,000, with carry-forward provisions, although it can fall to £10,000 after flexible pension access. The decision also depends on investment risk: drawdown requires ongoing management, while annuities offer greater income security but permanently reduce flexibility.

From April 2027, pensions are expected to fall within the UK inheritance tax regime. Taking an NHS defined benefit pension early is unlikely to reduce inheritance tax and could create other retirement-income disadvantages. Survivor benefits paid to an eligible spouse, civil partner, or in some schemes a nominated non-spouse beneficiary may be exempt, but tax-free lump sums taken during life and certain death benefits can form part of the taxable estate. Remaining funds in a SIPP may face inheritance tax, and beneficiaries of someone aged 75 or over may also pay income tax when accessing the inherited pension. The article outlines nil-rate and residence nil-rate bands, lifetime gifting options, the seven-year rule, and regular gifts from income, while recommending regulated financial advice.

A 62-year-old with an expected £450,000 defined-contribution pension asks whether to use drawdown or buy an annuity when retiring at 67. Tom Selby explains that drawdown offers flexibility and potential investment growth but requires ongoing risk management, while an annuity provides a guaranteed lifetime income but lacks flexibility. After taking £112,500 in tax-free cash, the remaining £337,500 could support roughly £26,000 annually for 20 years or £23,000 for 25 years through drawdown, assuming 5% annual growth after charges. A comparable annuity could provide around £27,000 a year, although rates may change and shoppers should compare providers. Combining drawdown and an annuity is also presented as a possible approach.

Rachel Reeves may need to raise £40bn–£50bn through tax increases or spending changes because of weak economic growth and fiscal-rule pressures. Pension tax relief and tax-free cash are possible targets, but reducing relief could anger higher-rate taxpayers and public-sector workers, while cutting the tax-free cash limit would likely require protections and deliver limited short-term savings. Readers are advised not to make irreversible financial decisions based on speculation, while AJ Bell is calling for a pensions tax lock during the current Parliament.

A person turning 66 in November 2026 will not automatically receive the state pension at age 66 because the pension age is being phased up to 67. Someone born in November 1960 will reach state pension age at either 66 years and 7 months or 66 years and 8 months, depending on their exact birth date. The full new state pension is £230.25 per week in 2025/26, although the amount depends on an individual’s National Insurance record. Eligible people must claim it after receiving an invitation from the government, usually around four months before reaching state pension age. Younger savers are advised to increase personal retirement savings because future state pension ages are likely to rise.

From April 2027, unspent defined-contribution pensions and certain defined-benefit death benefits are expected to count toward inheritance tax. However, inheritance tax generally applies only when assets exceed the relevant nil-rate bands and are passed to someone other than a spouse or civil partner. A single-life annuity falls outside the estate because payments stop at death, while joint-life annuity payments and guaranteed-period benefits have more specific treatment. Since drawdown and most inherited annuity arrangements will usually have similar inheritance-tax consequences, retirement decisions should primarily reflect income needs, investment-risk tolerance, and the desired level of flexibility.

A pension expert explains that taking more than a year to release or transfer a workplace pension is unusual, although the appropriate process depends on whether it is a defined benefit or defined contribution scheme. Delays may result from required financial advice, scam-prevention checks, illiquid investments or guarantees. The claimant should first complain to the former employer or pension provider and may request compensation; unresolved complaints can be escalated to the Pensions Ombudsman, which can determine whether maladministration occurred and award compensation.

A 47-year-old with only a workplace pension is advised to increase contributions, first checking whether their employer offers contributions above the legal minimum. Workplace pensions provide employer payments and tax relief, while higher-rate taxpayers may be able to claim additional relief from HMRC. A private pension can offer greater investment choice and access flexibility, while a Stocks and Shares ISA provides tax-free growth and withdrawals without pension access restrictions. The guidance stresses that long-term investing carries short-term risk but generally offers better returns than cash, whose purchasing power can be eroded by inflation.

A 38-year-old basic-rate taxpayer whose workplace pension is funded at the auto-enrolment minimum is advised not to opt out, because doing so would forfeit the employer contribution. A Lifetime ISA could be a useful way to save beyond the minimum: its 25 per cent government bonus matches basic-rate pension tax relief, investments grow tax-free, and withdrawals for retirement from age 60 are fully tax-free. However, a LISA carries a 25 per cent charge for other withdrawals and becomes less attractive than pension saving if the saver moves into higher-rate tax, when additional pension relief can reduce the effective cost of contributions.

Unspent defined-contribution pensions can currently be inherited outside the estate for inheritance-tax purposes, with tax treatment depending on whether the holder dies before or after age 75. Proposed reforms from April 2027 would bring these pensions into the estate for inheritance-tax calculations, although transfers to a spouse or civil partner would remain exempt. The reader may be able to reduce future tax through annual gifts, gifts that fall outside the estate after seven years, or regular gifts from surplus income, but the rules are complex and professional advice is recommended.

Inflation is generally a more significant concern for pension savers than interest rates. Defined benefit pensions usually include some inflation protection, although increases are subject to scheme rules and legal caps. For defined contribution pensions, high inflation reduces real investment returns and may require greater long-term growth, while higher withdrawals during drawdown can threaten retirement sustainability. For annuities, inflation affects the choice between level and escalating income, while higher interest rates typically lead to higher annuity rates through their effect on government bond yields.

Staying in a workplace pension is generally financially advantageous because it provides employer contributions, tax relief and tax-free investment growth. Someone considering additional savings should first assess their budget and emergency fund, then compare topping up the workplace pension with opening a SIPP. Key factors include charges, investment choice, flexibility, administration, customer service and trust. Retirement goals, desired income, investment risk and available guidance should also shape the decision, while retirement living standards are only a general guide and do not account for individual housing costs.

Salary sacrifice pension arrangements currently provide upfront tax relief and reduce employee and employer National Insurance contributions. The Government has not announced plans to abolish or restrict them, although HMRC has examined possible reforms, including removing National Insurance relief. Any changes would likely apply only to future contributions and could face opposition from employers. Salary sacrifice may also reduce redundancy payments and affect maternity or paternity pay, mortgage applications and some state benefits because it lowers contractual salary.

UK residents retiring to the Philippines may have different tax obligations depending on their tax residence. Under the UK-Philippines double tax treaty, UK state pension income remains subject to UK income tax, while UK private pension income is generally taxed by the Philippine authorities. The state pension can continue to be paid abroad, and because the Philippines has a social security agreement with the UK, it should continue to rise under the triple lock. Private pension providers may impose payment restrictions or fees for overseas transfers, and currency fluctuations may affect income.