Taking your pension lump sum

The normal maximum tax free cash limit when benefits are crystallised (turned from a pension into an income) is 25% of the total value of the benefit taken or 25% of the fund value for money purchase arrangements.

If you have any FSAVC’s or AVC’s these can also provide tax free cash under recent rule changes however some policy terms may still restrict this. Protected-Rights can also be used for the tax-free cash but not Guaranteed Minimum Pensions.

Where you have more than one pension arrangement, rather than calculating the lump sum from each arrangement separately, a retirement specialist will be able to amalgamate these to calculate the lump sum of the total individual plans. The advantage of putting all your pension pots together and taking the lump sum is that if done through an Independent Adviser, as well as being able to arrange 25% of the total pot they will be able to organise the most favourable income from the remaining 75%. This saves you the time of shopping around individually with all your separate pension arrangements. Long gone are the day when we work at one company for life and subsequently have one pension fund. It’s not unusual to retire with 5 to 10 different pensions from various stages in your career. Collating them all into one pot can be time consuming and a slow process. Let a retirement specialist do the hard work for you and benefit from tailored advice.

If you wish to take you pension lump sum but not your retirement income this can be achieved ‘drawdown‘. This is a way to take anything upto the 25% tax free cash from your fund but leave the rest invested, to be used for income at a later date.

The maximum lump sum can be taken from your pension any time from age 55 onwards.






Comments (3)

  1. I have 4 pensions:-
    The largest gives me a Guaranteed Minimum Pension, second in size is a Final Salary Bond, the last two being PPPs of roughly equal value. My question is can I take my maximum whole fund value 25% lump sum from the PPPs fund or am I required to take 25% of each fund?
    Many thanks Gary

  2. In case you didnt get the responses directly, It may be possible depending on the schemes and if you want to provide further details then I would be happy to look at them for you.

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