Millions of people are being urged to check their pension contributions amid growing risks they could “run out of money” during retirement.

A leading UK financial firm is warning everyone to check their contributions to avoid being left short once they retire.

Rowan Harding, from Path Financial, says although everyone is generally entitled to 25 percent of their pension tax-free – some caveats depending on your plan - when they retire, if they take a large lump sum or do not have enough in their pot, they could risk running out of cash in their old age.

She explained: “When you’re approaching retirement, you will have to decide when and how much of your pot you should take. This will have big ramifications in terms of what you’ll get and how long that cash will last.

The Bolton News:

“There is a minimum age, currently 55, when you’ll be able to take some or all of your pension money. But accessing your pension too early may not be sustainable in the long term. It takes careful planning to understand when, how and what when it comes to taking your pension.”

“But be mindful of how much you’ve got and when tax will apply. You do not want to run out of money. In most cases you will only get 25 percent tax-free on defined contribution pensions, so anything after that is liable to Income Tax payments.

“A financial positive, though, is that you will not make further National Insurance contributions on the taxable income from your pension.”

You will get the first 25 percent of your defined contribution pension tax-free, after which you will be liable to Income Tax on any earned income after you’ve been paid £12,570, which is the current Personal Allowance.

The amount of Income Tax you’ll pay depends on how much income you get above the Personal Allowance.

If you also get the full State Pension, you will not pay tax on that but it will count towards your Personal Allowance.

So, if you receive income from a defined contribution pension, your first 25 percent will be tax-free, and you will then pay tax on anything above £1,969 as the full State Pension adds up to £10,600.

The way the tax works on receipt of pension income is dependent on lots of different factors and it is always best to speak to an expert if you want your income to be tax efficient.

Rowan added: “Remember, planning now to make sure you are saving enough for your future, knowing when and how to take your pension or if leaving the pension pot to continue growing is best for you, is always worth checking with an expert Financial Planner”.