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“It's a great way to save for my future. I just wish I’d invested earlier in my life!”
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What is an individual lump sum (UFPLS)?
You can take lump sums from your pension pot when you want to. This is also known as Uncrystallised Funds Pension Lump Sum (UFPLS).
Each time you withdraw from your pension, it'll be a mix of tax-free cash and taxable money at the same time. Up to 25% will be tax-free – the other 75% will be taxed. The maximum tax-free cash you can take from all your pensions is £268,275.
How individual lump sum works
Work out how much you need to live on
Your pension has to last a long time, so it's essential to consider your needs before you decide how to withdraw.
Withdrawing your money
You tell us how much you want to withdraw from your pension. You could withdraw some or all of your pension – it's up to you.
Unlike some providers, we do not have a minimum withdrawal amount, so you can take your pension in as many amounts as you want.
Whatever you withdraw will always be a mix of up to 25% tax-free and 75% taxed. The maximum tax-free cash you can take from all your pensions is £268,275.
We'll automatically deduct any tax you owe via PAYE and pay it to HMRC.
Money Purchase Annual Allowance
Taking a lump sum will trigger the Money Purchase Annual Allowance, which will reduce how much you're allowed to pay into pensions from £60,000 to £10,000 per year.
Your remaining pension
If there's money left in your pension after your withdrawal, it'll remain invested.
A simple example
If you have a pension of £100,000
And you decide to take out £40,000
Then it’ll be a mix of tax-free cash and taxable money at the same time so £10,000 will be tax-free and £30,000 will be taxable.
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How much tax you might pay
You can usually take 25% of your pension tax-free. Any money you withdraw from the remaining 75%, will be added to any other income you have for that tax year.
You will pay tax on your lump sum if it is more than your personal allowance. How much depends on your total income for that tax year. HMRC has guidance on the tax you might pay.
Your first payment will likely put you on an emergency tax code. HMRC needs to provide us with your tax code before we can tax you correctly. You do not need to contact HMRC to change the tax code, but you can claim a refund on the tax you overpaid.
Advantages and disadvantages of individual lump sums
You can take all your pension pot in one go or a series of smaller lump sums. Saving some of your tax-free cash to access later on.
You can spread your tax liability over years by taking small lump sums.
A simple way to access tax-free cash and taxable income at the same time.
It lets you delay big pension decisions – if you have not yet decided how to access your pension in the long term, you can take lump sums in the meantime.
Compare your retirement options
Flexible income (drawdown) | Individual lump sums (UFPLS) | Annuity | |
|---|---|---|---|
Can I only take tax-free cash? | |||
Will it trigger the Money Purchase Annual Allowance? | Only if you take income | ||
Can I pass on this pension to a beneficiary if I die? | |||
If my circumstances change could the pension adapt? | |||
Which option can I carry on contributing to? | |||
Do my investments remain invested? |
How to apply for individual lump sums (UFPLS)
1. Book a call
Log in to your account and book a call with our pension specialists to discuss your options. Submit a request for the withdrawal you want via your account.
2. Get an illustration
We'll create an illustration to show you how your withdrawal could impact your savings.
3. Review and agree
Review your illustration and book another call with our retirement consultants to complete the final steps.
4. Receive payment
Once you've told us you are happy to proceed, we'll process your pension withdrawal to your bank account. You'll receive your pension withdrawal within 10 working days.
Why choose us?
No minimum withdrawal amounts
Unlike some providers we do not have a minimum withdrawal amount, so you can take your tax-free cash in lots of smaller chunks if you want to.
Value
Our funds are good value, which means you can keep more of your returns.
UK-based support
Our pension specialists are on hand to help, no matter what the question.
Things to consider
When you first receive a taxable payment from us it’s likely that you’ll pay an emergency tax rate. This is because HMRC will need to provide us with your tax code before we can tax you correctly. This means you may pay too much tax at first – but you’ll be able to claim a refund from HMRC.
Taking a lump sum will trigger the Money Purchase Annual Allowance, which will reduce how much you're allowed to save into pensions from £60,000 to £10,000 per year.
We’ll usually pay any money in your pension to your beneficiaries. How much tax they’ll pay on that inheritance will depend on how old you are when you die.
- if you die before you’re 75, your beneficiaries will usually receive any money remaining in your pension tax-free
- if you die when you’re 75 or older, your beneficiaries will usually have to pay income tax on any money remaining in your pension when they withdraw money from it
If you take money out of your pension and leave it to your beneficiaries, they may have to pay inheritance tax on it.
Need help?
Guidance from Pension Wise
Get free and impartial guidance from the government s Pension Wise service.
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