Retirement alert: You face a test at age 75 that will determine whether you pay 25% tax | Personal finance | Finance

Although a person may be retired and have been receiving their pension for years, that is not necessarily the end of the challenges. This is because everyone is still subject to a lifetime allowance test once they reach a certain age.

The age of 75 is a golden year for savers, as it can be decisive.

This is when retirees will reach the cut-off point for lifetime allowance.

The lifetime allowance limits the amount a person can hold in pensions throughout their lifetime without facing a heavy tax burden.

Exceeding it means the penalty will apply, so Brits may want to be extra careful to hold on to their savings.

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An exception to the rule is for levy funds established before April 6, 2006 – the date the lifetime allowance was first introduced.

The government-backed MoneyHelper website has issued a warning about the tests.

It states: “Remember, however, that what matters is the value of your pensions at the time the checks are carried out.

“So you may need to consider how the value of your pensions has changed between now and when you expect a check to be carried out.

“For example, if you’re 55 now, but don’t expect to withdraw money until you’re 60, you need to consider whether the value of your pensions might increase by then.

“If so, it will use up more of the lifetime allowance you have.”

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