What you take from your pension affects how much tax you pay – and could affect any benefits you get from the Government.
When it comes to taking pension savings, people “should not overlook the implications for their tax credit awards, benefits and overall household income,” says revenue benefits.
If you get a means-tested benefit such as jobseeker’s allowance, housing benefit, council tax credits, tax credits or pension credit, your pension income, along with any other sources of income such as rent or savings interest, can reduce what you are entitled to.
Any lump sums or income from your pension that take you over a certain limit could even see you risk losing all State support such as housing benefit, for example. It’s an important issue given that more than one million people age 65 or over get some help with their rent, says thisismoney.co.uk.
According to MoneySavingsExpert.com: “If you get a lump sum, then this may count towards your savings total – if you’ve over £6,000 of savings it can reduce your benefit, and over £16,000 it can stop it.”