Retiring soon: the cash side of your plans

Approaching retirement? Free Pension Wise guidance first, then the cash part of a retirement plan, the over-65 cash ISA rule, tax on interest, Premium Bonds and FSCS.

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Last checked: 14 October 2026. We check this page regularly against official sources.

Retirement brings big choices about pensions, income and tax. ClearRates covers just one part of that: the cash you keep in savings. Pension decisions are often hard to undo, so many people get free guidance or regulated advice before making them, and then look at where their cash sits.

This page covers the cash side: how a cash reserve can fit into a retirement plan, ISAs after 65, how savings interest is taxed alongside pension income, and how your money is protected.

This is general information and guidance, not personal financial advice. ClearRates is not authorised by the FCA to give advice, and we don’t cover pensions, annuities or investments.

Before any pension decision: free guidance and regulated advice.

  • Pension Wise is free, impartial and government-backed. It’s for people aged 50 or over with a UK defined contribution pension (and some under-50s, for example if you’ve inherited a pension or are retiring early due to ill health). It explains your options for taking money from a pension, how each is usually taxed, and how to spot scams.
  • Check your State Pension forecast and your State Pension age.
  • For a personal recommendation, see MoneyHelper on choosing a financial adviser and check any firm on the FCA register.
  • Be wary of cold calls, texts or emails about your pension. Unexpected offers of “free pension reviews” or guaranteed high returns are common warning signs of a scam.

Struggling with bills or debts? Free, confidential help is available from MoneyHelper’s debt advice locator, StepChange and Citizens Advice. It’s worth talking to them before taking money from a pension to clear debts.

Step 0: check the foundations

Before choosing accounts, many people near retirement look at:

  • Expensive debt: credit cards and loans usually cost more in interest than savings earn.
  • Income in retirement: State Pension, any workplace or personal pensions, and when each starts. This is what the cash needs to sit alongside.
  • Benefits: if your income will be low, check whether you could get Pension Credit. GOV.UK says savings of £10,000 or less don’t affect it; above that, every £500 counts as £1 a week of income.

The cash part of a retirement plan

Some retirees keep a cash reserve, for example enough for one to three years of expected spending on top of their regular income. The idea is that they aren’t forced to sell other assets, or take more from a pension, at a bad time. How much suits anyone is a personal decision, and it’s often worth discussing with an adviser as part of the wider plan.

Common homes for the cash part:

  • Day-to-day buffer: easy access accounts for spending and emergencies.
  • Next year or two: notice accounts or short fixes.
  • A ladder of fixes: some people split money across 1-year, 2-year and longer fixes so part matures each year, giving a regular point to review.

Over long periods, cash can lose value to inflation. Decisions about investing or using pension money for longer-term growth are outside what ClearRates covers, and this is where regulated advice is worth considering.

Compare types in easy access vs notice vs fixed.

ISAs after 65

The ISA allowance is £20,000 in 2026/27. From 6 April 2027 the cash ISA limit is due to fall to £12,000 a year for under-65s, but HMRC’s published plans say people aged 65 or over can still pay up to £20,000 a year into cash ISAs. Things to consider:

  • Interest in a cash ISA is tax-free and doesn’t count towards the Personal Savings Allowance.
  • Moving existing ISA money between providers by transfer keeps it tax-free and doesn’t use this year’s allowance.

Compare cash ISAs, fixed cash ISAs and ISA transfer offers.

Tax on savings interest in retirement

Pension income, including the State Pension, is taxable and uses up your Personal Allowance (£12,570) first. That changes how much savings interest is tax-free:

  • Starting rate for savings: if your other taxable income is under £17,570, up to £5,000 of interest can be tax-free. Every £1 of other income above the Personal Allowance reduces it by £1.
  • Personal Savings Allowance: £1,000 for basic-rate, £500 for higher-rate and £0 for additional-rate taxpayers.

So two people with the same savings can pay different tax depending on their pension income. See the PSA guide.

Premium Bonds and protection

  • Premium Bonds: backed by HM Treasury through NS&I, with £25 to £50,000 per person and prizes free of UK Income Tax and Capital Gains Tax. Prizes aren’t guaranteed, and you may win less than the prize fund rate, or nothing. See Premium Bonds.
  • FSCS: deposits are protected up to £120,000 per person, per banking licence. Brands sharing a licence share the limit. Retirement benefits paid into a bank account can count as a temporary high balance, protected up to £1.4 million for six months. See FSCS protection explained.

Work through the steps

What should I do with my savings? goes through a buffer, tax and the protection limit. It is information, not a recommendation. The moment list on that page links back here.

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Written by ClearRates. General information, not personal financial advice. Rates change often, so check the provider’s terms before you apply. ClearRates may earn a commission from some links; this never affects how we rank rates. Last checked 14 Oct 2026.

Sources (all accessed 14 Oct 2026)

Questions

Can I still pay £20,000 into a cash ISA after April 2027?

Yes, if you're 65 or over, under the plans HMRC published in September 2026. Under-65s are due to have a £12,000 cash ISA limit within the £20,000 overall allowance.

Who can get a Pension Wise appointment?

People aged 50 or over with a UK defined contribution pension, and some under-50s, for example if they've inherited a pension or are retiring early due to ill health. It doesn't matter how much the pension is worth.

Is interest on my savings taxed if I'm retired?

It can be. Pension income uses up your Personal Allowance first. After that, the starting rate for savings and Personal Savings Allowance may cover some or all of your interest.

Are Premium Bonds a good place for retirement savings?

They're 100% backed by HM Treasury and prizes are tax-free, but returns aren't guaranteed. Many people compare the prize fund rate with guaranteed savings rates before deciding.

Will my savings affect Pension Credit?

GOV.UK says £10,000 or less won't. Above that, every £500 counts as £1 a week of income.

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