When you’ve reached the minimum pension age, you’ll have the option to take all the money in your pension savings as a one-off taxable lump sum. This is known as an Uncrystallised Funds Pension Lump Sum (UFPLS). This could help pay for the retirement adventure you’ve been saving for.
Why consider taking the money in your pension savings in one go?
Control
It gives you full control over what to do with all the money in your pension savings.
Immediate access
Get access to your hard-earned savings and use them in a way that suits your retirement plans, health or lifestyle.
Tax-free lump sum
Normally up to 25% of your pension savings are paid tax-free.
Simplicity
A one-off taxable lump sum allows you to withdraw directly from your pension pot – so you don’t need to open a new product like an annuity.
A few things to be aware of before taking your pension savings in one go:
- Will your pension last? Your pension is designed to give you money to live on in retirement. It’s important to make sure it won’t run out.
- Will you pay more income tax? If you’re still working or have any other form of income, taking your pension now could put you into a higher tax bracket. You could end up owing money to HM Revenue & Customs (HMRC).
- Future income: Any pension income you receive needs to last for the rest of your life. As the price of goods go up, the cost of living will become more expensive. Withdrawing all your pension pot means you won’t get a regular income from your pension in the future.
- Making your income last: Consider how you’ll manage and invest your one-off lump sum payment to ensure it lasts throughout your retirement.
Remember: You can also choose to drawdown a regular income or buy an annuity. Take the time to look at all the retirement options available before making your final decision.
What to do if you want a UFPLS
You’ve looked at your retirement options and want to withdraw a one-off taxable lump sum
Useful information on UFPLS
You can continue to pay into all pensions and claim tax relief before you reach age 75. After age 75 has been reached, we can’t accept any pension contributions. Also remember to check if you’ve triggered the Money Purchase Annual Allowance before you start. This is the yearly limit on how much can be paid into pensions and still be eligible for tax relief.
The government limits the amount that someone can receive tax-free from all their pensions to £268,275. This is called the Lump Sum Allowance (LSA).
If you get means-tested benefits, taking money from your pension savings could affect your eligibility to claim or stop you from receiving benefits. It’s important to check if it applies to you.
With flexi-access drawdown:
- you’ll normally be able to take up to 25% of your pension savings tax-free. The other 75% is moved to a drawdown fund and invested in a fund or Investment Pathway of your choice. When you’re ready, you can take income payments as and when you need it.
For example, if you choose to take £10,000 tax-free, £30,000 would be moved to your drawdown fund. You can then ask us to set up regular income payments, stop payments or change how much regular income you receive.
With UFPLS:
- you take your pension in one go. 25% is tax free (subject to the Lump Sum Allowance maximum), but the remaining 75% is paid out at the same time.
For example, if you took £40,000 as a UFPLS, you’d receive £10,000 tax-free. The other £30,000 would be paid at the same time and taxed as income.
Some providers offer you the option to take partial UFPLS. We don’t offer this, but if you want to withdraw from your pension as and when you need it, you can do this through our flexi-access drawdown option.
When you set up a Personal Pension Account, you’ll be asked to nominate a beneficiary. This is the person you’d like to receive the remaining funds if you die.
- If you die before taking any benefits, the full value of your pension pot is normally paid as a lump sum to your nominated beneficiary.
- If you die after flexi-access withdrawal has started, we normally pay any amount left in your drawdown fund to your nominated beneficiary as a lump sum.
If you’re under the age of 75 when you die and your death benefits are paid within two years from being notified of your death, any lump sum, income drawdown and annuity are normally paid free of income and capital gains tax.
From 6 April 2027, most unused pension funds and pension death benefits will be included in the value of a deceased person’s estate for inheritance tax purposes. If your estate is more than the maximum limit, a tax charge will be due.