The decision about whether to access any tax-free cash lump sum or not needs to be made when you access your pension benefits.
In normal circumstances, you can take up to 25% of your pension funds as a tax-free cash lump sum.
The official term for this lump sum is Pension Commencement Lump Sum (PCLS).
Obviously, if you take part of your pension funds as a lump sum you will have a smaller amount to fund your retirement income.
If you wish, you can access your tax-free cash lump sum without taking an income. See our page on Capped Drawdown.
There are some limited circumstances where it is possible to take more than 25% of the pension fund value as a tax-free lump sum.
Your pension provider should be able to tell you whether or not you qualify for a higher amount.
Some people utilise their tax-free cash lump sum entitlement as part of their phased retirement strategy.
Once an annuity or Capped Drawdown plan has been purchased/taken with your pension funds there is usually no further entitlement to a tax-free cash lump sum unless you have other pension funds still to be accessed.