Overview
- The full new State Pension for 2026/27 is £12,548, which uses nearly all of the standard £12,570 Personal Allowance and leaves just £22 of tax-free income.
- Experts warned on Monday that most extra pension withdrawals will be taxed at the basic 20% rate and could hit the 40% higher-rate once total income passes £50,270.
- Financial advisers advise splitting withdrawals between partners to use two Personal Allowances, using tax-free Stocks and Shares ISAs, and limiting drawdowns to lower taxable income.
- Modelled examples from advisers show that, for a £600,000 pension pot growing at 4% net, annual withdrawals of about £25,000–£32,500 balance living standards with the pot lasting roughly 30 years.
- A policy change expected from April 2027 to treat pensions as part of estates for inheritance tax could alter incentives to keep money in pension pots and makes regular review of drawdown plans essential.