Martin Lewis warns against crucial pension mistake as he shares top tips for savers
Martin Lewis warns against crucial pension mistake as he shares top tips for savers
Share:
The money saving expert says there are many ways to boost a pension pot. Money expert Martin Lewis has issued a “tax warning” to pension savers, giving advice that could help hold on to tens of thousands of pounds. Most personal pensions will set an age when you can start withdrawing money, which is usually not earlier than 55. But how and when you take the money is important, and could cost savers dearly if they “get it wrong,” says Mr Lewis.
![[Martin Lewis shares 'crucial weapon' in cutting your credit card debt.]](https://static.independent.co.uk/2025/01/22/10/59/Martin-Lewis-debt.jpeg)
Up to 25 per cent of personal pension money can usually be withdrawn as a tax-free lump sump, with the rest subject to tax based on your income tax band. However, there could be major tax savings to be made if you plan to drop a tax band in later life.
Mr Lewis explains that you can take your 25 per cent tax-free lump sum and put the rest in income drawdown, an investment product that you can take money out of when you need to. Or you could opt for an annuity, which pays you a set income each year for the rest of your life.
With either option, it would mean that the remainder of your pension pot (which isn’t tax-free) would be taxed at the point you access the money, which may be after you have moved down a tax band. Speaking on a special pension-themed episode ITV’s The Martin Lewis Money Show, the personal finance expert said: "So why is this important? Imagine that right now you're a higher 40 per cent rate taxpayer, and at a later date, once you retire, you're not going to have as much income. You'd be a 20 per cent rate taxpayer.
