Your pension questions answered

We’ll be covering everything from pension transfers to retirement options, and what happens to your pension when you pass away.

Use the player icons above to listen on your favourite podcast app, or read the full transcript below.

This podcast isn’t personal advice. If you’re unsure what’s right for you, seek financial advice. Pension and tax rules can change, and benefits depend on personal circumstances. Investments can fall as well as rise in value, so you could get back less than you invest.

Full podcast episode transcript

[0:00] Helen Morrissey: Hello and welcome to the Switch Your Money On podcast from Hargreaves Lansdown. I’m Helen Morrissey – Head of Retirement Analysis.

[0:06] Clare Stinton: And I’m Clare Stinton – Senior Personal Finance Analyst.

Happy New Tax Year, Helen!

[0:11] Helen Morrissey: Thank you.

[0:12] Clare Stinton: Did you do anything to mark the occasion?

[0:13] Helen Morrissey: Well, I might have gone a bit wild, Clare, and made a contribution to my Stocks and Shares ISA. How about you?

[0:20] Clare Stinton: That is a lot more productive than mine ‘cause I think I had chocolate for breakfast!

[0:24] Helen Morrissey: I would never have chocolate for breakfast – but, I’ve gotta say, I did have it for lunch and dinner.

[0:28] Clare Stinton: [Laughs] See, I had a balanced dinner – just, ‘cause you know, it’s all about doing the best of both.

So, the start of the new tax year is the perfect time to check in on your finances – from viewing where you are, setting a few goals for the 12 months ahead, and generally getting your finances off to a strong start.

So, for our first episode of tax year 2026-’27, we are diving into what is undoubtedly your favourite topic, Helen – ‘Pensions’ – ...

[0:52] Helen Morrissey: Hurray!

[0:53] Clare Stinton: ...because, let’s be honest, most of us could do with paying our pensions a little more attention – and the earlier you do, typically, the better chance of enjoying the retirement you’re hoping for – whether that is holidays, time on the golf course, or treating loved ones.

[1:07] Helen Morrissey: Absolutely, Clare.

So, as we enter that new tax year, people will be making resolutions on how to get the most from their retirement planning. It’s a time when people have lots of questions, and we’ve answered some of the more popular ones here, so you can get a head start with your pension.

[1:23] Clare Stinton: Yes – today, we’re answering HL clients’ popular pension questions. We’ll be covering everything from pension transfers to retirement options, and what happens to your pension when you pass away.

But, before we jump into the questions, what would you say is the biggest mistake that people make with pensions, Helen?

[1:39] Helen Morrissey: I think leaving planning until retirement is approaching is a really key one. I think the earlier you start thinking about your retirement, and planning for it, the better.

[1:50] Clare Stinton: I couldn’t agree more.

So, we’ve got a lot of ground to cover – so, first question... starting with, in my experience, the most-asked pension question... Helen, how can people trace lost pensions?

[2:00] Helen Morrissey: This is, indeed, a very popular choice, Clare.

So, if you think you’ve lost an old pension, then give the government’s Pension Tracing Helpline a call – you can also go online, it’s on the GOV.UK website.

Now, all you need is either the name of your old employer or the pension provider. The helpline... it can’t tell you if you do have a pension, but what they can do is give you contact details, so you can then go on and find out. And there’s a real potential there to find a pension that could be worth thousands of pounds, that could make a real difference to your retirement.

Once you’ve tracked down your old pensions, you may decide to then consolidate them so you’ve got an overarching view of what you’ve got. However, before you do, it’s really important to make sure that you don’t incur any exit fees, or potentially miss out on any valuable benefits, such as guaranteed annuity rates.

[2:54] Clare Stinton: Thanks, Helen – lots of useful information there.

Some people might have to find benefit pensions – which are also known as final salary schemes – and they provide a guaranteed benefit. Often, considered the gold standard of pensions – and you can usually identify those by having a look at your statement. So, any mention of trustees is usually a good indicator, as well as suggesting you’d receive a guaranteed annual pension income, rather than displaying a total pot value.

If you’re unsure, it is always best to ring your provider to check – and, though we can’t provide advice, the general industry consensus is that these are left where they are because they do offer that guaranteed annual income. Typically, that comes with an annual growth rate to protect that income from inflation – and, therefore, it’s very valuable.

If you do have one of these types of pension schemes – and you are unsure about whether you might want to transfer it – then you are best seeking advice from a financial advisor.

[3:49] Helen Morrissey: So, I’ve got a question for you now, Clare... what happens to your pension when you leave your workplace?

[3:55] Clare Stinton: So, first things first, your workplace pension belongs to you – so, when you leave an employer, regular contributions will stop, of course, with those pay cheques – but what you’ve built up in your pension will remain invested, and you’ll be able to take an income from it after you reach pension age.

It might be possible for you to personally pay into the pension after you’ve left, but that won’t happen automatically – you will need to speak with the pension provider to set that up.

It is also worth bearing in mind that, if you are leaving one job – and you’re moving into another – then you’ll likely be auto-enrolled into a new workplace pension. So, another option that you have available to you is choosing to roll your previous workplace pension into your new employer scheme and combining those.

Now, that can make it easier to keep track of your savings – having everything in one place offers easier administration – but other considerations that could influence your decision are things like the management fees – so, ‘What’s the cost?’ – investment choice that provide a service and facility – so, ‘Do they have an app,’ for instance – and also, ‘Do they offer all of the retirement options?’ Again, as you’ve said, Helen, best to check for exit fees and loss of benefits before placing a transfer instruction.

[5:00] Helen Morrissey: Absolutely.

[5:02] Clare Stinton: So, next question for you, Helen... how much do you need in retirement?

[5:05] Helen Morrissey: Now, this is a tricky one...

[5:06] Clare Stinton: [Laughs]

[5:06] Helen Morrissey: ...because the answer is, ‘It depends on the person.’

So, some people will want their retirement to be filled with travel to far-flung destinations – while others will be after something that’s maybe a bit more modest.

Some people will have to factor housing costs, like rent, into their plans – whereas other people will have already paid off their mortgage. All of these things will have a really big impact on how much you’re gonna need in retirement.

I think it’s really important to take the time to think about this in advance, so you’ve got some sense of how much you’re likely to need on an annual basis. You can then use online pension calculators, and they’ll give you an idea of what you’re on track for – and then this gives you the time to fill in any gaps, if needed.

[5:50] Clare Stinton: Thanks, Helen.

[5:51] Helen Morrissey: So, one for you now... d’you have to take your 25% tax-free cash in one go?

[5:57] Clare Stinton: I’m really glad that this question is included. There is a big misconception that you have to take all of your tax-free cash in one go. Actually, you can stagger it – and not taking it all at once can mean that you end up taking a higher sum as tax-free cash ‘cause you’ve left it in your pension for longer to grow. This, of course, is totally dependent on market movement – and it could work the other way too. So, if there is a market downturn, then you could end up receiving less.

Now, one way of staggering your tax-free cash is by a phased drawdown – that is where you gradually move your pension into drawdown in stages – and, generally, each time you move money into drawdown, 25% will be tax-free. So, for example, if you had a pension pot of £400,000 – and you needed £25,000 tax-free cash – you would take benefits from £100,000 of your pension, releasing £25,000 – that , of course, is 25% of that £100,000, as tax-free-cash – and then, the other £75,000 (or 75%) would slide into drawdown – and it can remain invested, and will await your next instruction – which could be taking an income payment, or buying an annuity down the line. But, importantly, this can help you manage your tax liabilities and keep you under certain tax thresholds.

It’s also worth flagging that, if you do flexibly access your pension – and that’s taking an income payment from drawdown – you’ll be limited as to how much you can pay into your pension, moving forwards – and that will be £10,000 a year... that’s known as the Money Purchase Annual Allowance.

[7:30] Helen Morrissey: That’s brilliant, Clare – that’s really useful.

Now, there’s also this really interesting thing, known as UFPLS – can you tell us a bit more about that?

[7:37] Clare Stinton: Yes – so that’s Uncrystallised Funds Pension Lump Sum – so a bit of a mouthful, so you’ll often hear it referred to as ‘Lump Sum Withdrawal,’ but it is another route for staggering what you can take, tax-free.

So, this enables you to take tax-free amounts in stages, by taking lump sums directly from your pension, without going into drawdown – with 25% of each portion, usually tax-free, and then the remainder taxed. That, potentially, means that you would face a higher tax bill. Same as taking flexible income from drawdown, this method will trigger the Money Purchase Annual Allowance. So, moving forwards, you would be restricted to contributing a maximum of £10,000 per year to your defined contribution pensions. Now, that can catch people out, who are still working – with both them and their employer paying into their pension.

It’s worth flagging, at this point, as well – for everyone listening – that Pension Wise is a free, impartial government-backed service that provides guidance on pensions and retirement. So, for anyone who’s over the age of 50, then you have the opportunity to take up a one-to-one appointment, and they can be used to discussion retirement options, tax implications, how to stop pension scams. They won’t provide financial advice, but they will offer guidance and a really valuable second opinion – which, actually, is a great segueway to question number five.

So, Helen, could you explain how pension tax relief works?

[8:56] Helen Morrissey: Absolutely. So, tax relief is a great incentive to contribute to your pension, with the income tax that you would have paid to the Government going into your pension instead.

You receive tax relief at what’s known as your marginal rate – so that means a £100 pension contribution would only cost a basic rate taxpayer £80. For a higher rate taxpayer, it’ll only cost as little as £60 – and, if you’re an additional rate taxpayer, it could be just £55. This could be lower if you contribute via salary sacrifice.

Now, if you are a basic rate taxpayer, then you should receive the right amount of tax relief on your contributions, automatically – but, if you pay tax at a higher rate, you may need to claim some of it... it all depends on how your contributions are made. So, if you are in a salary sacrifice arrangement – or what is known as a net pay arrangement – then you should get the right amount of tax relief. This is because, with these methods, your pension contribution is deducted from your salary before income tax is calculated – so that means that you only pay tax on what is left, so you would get full tax relief immediately.

[10:07] Clare Stinton: Thanks, Helen. Let’s just draw out that salary sacrifice information because that is something that’s available through your workplace pension – and it is the most tax-efficient way of contributing to your pension – because, you say, both the income tax and National Insurance, and what you pay in. So, that additional NI saving is worth 80% for basic rate taxpayers, and 2% for higher rate tax payers – but it means that every pound that you put into your pension... for basic rate taxpayers, that’s an extra saving of 8p – or 2p for every pound for higher earners. It goes into a pot for ‘Future You,’ rather than you handing it to the taxman.

Now, the window to maximise that salary sacrifice benefit won’t stay open indefinitely – so do consider making the most of any additional savings offered to you by your workplace scheme because there will be a cap on National Insurance relief coming in in April 2029.

[10:56] Helen Morrissey: That’s brill – thanks, Clare.

So, we’ve talked about salary sacrifice – we’ve talked about net pay arrangements. Now, if your contributions are made via relief at source, then things work a bit differently, as contributions are deducted from your salary after tax. Your employer would take 80% of the contribution value from your salary – after tax – and pay this to your pension provider. The pension provider then reclaims the basic rate tax relief of 20% from HMRC.

So, if you’re entitled to tax relief at a higher rate, you need to claim the extra, yourself, normally via your tax return. If you are unsure, it’s worth checking with your employer how your contributions are made. You can backdate claims for up to four years – and, if you don’t fill out a Self-Assessment form, you can claim the relief online through the GOV.UK website, or via post.

I also want to point out that tax rates and bands are different for Scottish taxpayers.

So, back to you, Clare... do you pay tax on pension income? – this is a big one.

[12:03] Clare Stinton: The short answer is ‘Yes.’

So, up to 25% of your pension can usually be taken as tax-free cash – which we’ve just discussed – and that is up to a maximum of £268,275 for most people. And then, when it comes to the rest of your pension pot... as you withdraw, you will be taxed according to the income tax band – so that’s the same approach as when you’re employed.

So, this tax year – 2026-’27 – you can take up to £12,570, tax-free – that’s your personal allowance – anything above that will be taxed. So, if you have pension income of £30,000 this tax year, then that first £12,570 would be tax-free – then the remaining £17,430 would be subject to basic rate tax, at 20%.

Now, it is worth pointing out that your State Pension is included in taxable pension income. So, currently, the full new State Pension stands at just a whisper below the personal allowance of £12,570 – so even drawing a small pension income from elsewhere will tip you into tax-paying territory.

From April 2027, it is expected that the full new State Pension, on its own, will breach the personal allowance of £12,570 – so that does risk more pensioners being pulled into tax-paying territory.

The Government announced at the last Budget that, from April 2027, any pensioner living solely on the State Pension would not have to pay tax on it. Now, that won’t cover income from the additional State Pension, though – otherwise known as the Second State Pension – and we are waiting further detail on how that will work in practice.

[13:42] Helen Morrissey: So, just on that tax-paying point, Clare, I wanted to say that, if you are married, then you can make the most of both of your individual tax allowances to manage your tax bill. So, you mentioned there, earlier on, that you’ve got that personal allowance of £12,570 – ...

[13:59] Clare Stinton: Mm-hm.

[13:59] Helen Morrissey: ...after which, you start paying tax. If you’re married, then you both have access to that personal allowance – so you can make use of those tax allowances to really manage your bill, and make sure that, for instance, one of you isn’t paying tax at a higher rate when they don’t need to.

[14:15] Clare Stinton: Absolutely – that’s a great tip.

So, staying on the topic of withdrawing money, what options do people have at retirement?

[14:21] Helen Morrissey: So, you’ve got several different options, when it comes to taking an income at retirement.

If you want a guaranteed income, then you could consider using part, or all, of your pension to purchase what’s known as an annuity. This will pay you an income for life – and you have a choice as to whether you get one that pays out a level income, or one that increases every year.

Different providers offer different rates – and you can get annuities that will also pay out an income to your spouse or civil partner when you die. However, once bought, an annuity cannot normally be unwound, so you do need to make sure that you take your time to assess the market before you buy one, to make sure that you’re getting the best type of annuity for you.

Now, you can also opt to remain invested in the market and take an income via income drawdown. This is more flexible than an annuity, but you will also need to be aware that markets do fluctuate – so you need to make sure that the income you’re taking is gonna be sustainable over time, ‘cause you could be retired for many, many years.

You might wish to combine income drawdown with an annuity purchase – and that means that you can secure a level of guaranteed income while retaining flexibility – so you do have options to mix and match.

Now, you mentioned earlier Uncrystallised Funds Pension Lump Sum (otherwise known...

[15:45] Clare Stinton: [Laughs]

[15:45] Helen Morrissey: ...as UFPLS)... this enables you to withdraw funds directly from your pension pot without having to move into income drawdown. Each withdrawal will generally be 25% tax-free – so you don’t have the option of taking a tax-free lump sum, so it is less flexible than income drawdown.

You also have the option to take your entire pension as a lump sum. This has the potential of leaving you short of cash later on, though – but it can be an option when people have other larger pensions elsewhere. It’s often a really good idea to get financial advice regarding retirement income, to make sure that you get the right approach for your needs. Again – as you mentioned earlier, Clare – this is also an area that Pension Wise can provide support with.

[16:31] Clare Stinton: You’ve made a really good point there about the mix-and-match approach, ‘cause you don’t just have to go down one route – ...

[16:36] Helen Morrissey: Absolutely.

[16:36] Clare Stinton: ...and Pension Wise can support with all of those options, in terms of what they offer you, but also the consequence of, perhaps, taking one action – what that can mean, down the line.

[16:46] Helen Morrissey: So, we’re moving onto more investment-type questions now – so can you change your Workplace Default Fund, Clare?

[16:55] Clare Stinton: Yes, you can. So, the default fund is selected by your workplace pension provider – it’s where you and your colleagues’ contributions will be automatically invested.

Now, these funds are designed to be steady and diversified, meaning your money is spread across a range of different investments – helping to cushion pension members from market ups and downs. But it’s worth bearing in mind that, by nature, default funds are built to be a one-size-fits-all solution, because they have to work just as well for someone, who is 22, starting their first job – and being enrolled into their company pension scheme – as they do for a 50-year-old, who’s joining that pension scheme later in life.

So, those individuals are likely to have very different timelines to retirement – and, therefore, probably very different investment goals and values. It is possible to move out of your workplace default fund and into a fund – or perhaps funds... you might be able to spread your contribution across a few that will better suit your needs.

Now, the choice that you will have will depend, very much, on your provider – so it’s best to ask them directly. Those that are just starting out building their pension – with 40 years ahead of them... they might be happy to take a more adventurous approach, in the hope of a higher return – comfortable that their long time horizon means that they’ll be able to ride out the market ups and downs.

Just make sure that whatever you do invest in is well-diversified across different asset classes and geographies, and that you aren’t paying unnecessarily high fees.

Another workplace pension feature – that’s included as part of autoenrollment – is something called ‘Lifestyling.’ Helen, what is Lifestyling, and do we need it?

[18:29] Helen Morrissey: I get asked this one quite a lot, actually, Clare.

So, Lifestyling is an investment approach – whereby, as you get closer to retirement, your fund will automatically be moved out of equities into so-called ‘Less risky assets,’ such as bonds. This has the aim of sheltering your fund from any stock market volatility, the closer you get to retirement – however, this might not suit your needs. For instance, if you wanted to remain in income drawdown in retirement, you may want to remain invested in equities, rather than being moved into bonds – so it’s well worth checking with your scheme, and seeing what options there are, and making sure that you get the right approach for you.

[19:10] Clare Stinton: It’s worth pointing out that Lifestyling as well is usually attached to your default retirement age with your scheme provider. So, if that default retirement age is set to 65, then it will start Lifestyling you to that target date – whereas, if you know you are looking to retire earlier or later, it is well worth changing that default age, so that it fits with your timeline.

[19:31] Helen Morrissey: Absolutely – it’s well worth checking in with your pension provider as to what you might have chosen – and whether that needs to change, depending on your needs now.

So, I’ve got another question for you now, Clare – so this is around what happens when people die... How will a pension be inherited by beneficiaries?

[19:51] Clare Stinton: Another popular question – and the answer differs slightly, depending on the type of pension that you have.

So, if you have a defined benefit pension – so the final salary schemes – then you need to check the scheme rules. Some will allow for a child to inherit under certain circumstances, but others will only allow a spouse, or civil partner, to receive the death benefits. They do tend to be really individualistic in nature, so it is best to check directly with your scheme.

Whereas, if you have a defined contribution pension, then it’s normally different. You need to make sure that you fill out your Expression of Wish Form with your pension provider, so that the administrators know who you would like your pension to be paid out to in the event of your death.

Now, not keeping these records up to date can cause delay and frustration at an already difficult time – and can even mean that an ex-partner could potentially inherit at the expense of a current one. I would also say that, in my experience, quite often, those Expression of Wish Forms are confused with the Death in Service Forms that you complete with your employer – so they really do need to be completed with your pension provider.

If you pass away before age 75, then your beneficiaries – whether that’s children, grandchildren, friends, the man next door – won’t usually have to pay income tax on what they inherit – but, if you were over 75 at the time of your death, then they will pay tax at their marginal rate – so it’s at their tax rate, not yours.

As it currently stands, pensions are not usually part of your estate for inheritance tax purposes – but, as we know, Helen, from April 2027, most unspent defined contribution pensions will be scooped into inheritance tax calculations – so you do need to be aware of any potential tax bills that your beneficiaries might receive.

[21:30] Helen Morrissey: Absolutely. I just wanted to add that, if you’ve used your pension pot to buy an income from an annuity – then, unless you’ve built in guarantees, or value protection, at the point of purchase, there’s nothing to pass on to anyone. A Joint Life Annuity is not caught by this new rule, and so will continue to be paid to someone else after death.

[21:51] Clare Stinton: Thanks, Helen – really good point.

And, on that cheery note of pension death benefits, that’s it for this week. But, before we go, we should remind you that this was recorded on April 13^th 2026, and all information was correct at the time of recording.

Next week, Emma Wall and Matt Britzman will be back with an Investment episode.

[22:08] Helen Morrissey: Nothing in this podcast is personal advice – if you’re unsure about what’s right for you and your circumstances, you should seek advice.

[22:16] Clare Stinton: Pension and tax rules can change and benefits will depend on circumstances. Pension money can’t normally be accessed until 55, though this is rising to 57 from 2028.

[22:27] Helen Morrissey: Over five years or more, investing typically offers better returns than cash savings, but investments do go up and down in value, so you could get back less than you’ve put in.

So, all that’s left is for us to thank our Producer, Elizabeth Hotson.

[22:42] Clare Stinton: And to thank you all, very much, for tuning in – we’ll be back again soon. Bye!

[22:46] Helen Morrissey: Bye!