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Can I Get A Tax-Free Cash Lump Sum From My Pension Funds?

Last updated: 11/07/2011

Most types of pension plan have the option of taking a tax-free cash lump sum before exchanging the remaining fund for a series of income payments.

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.

Article Category: Tax-free cash Tag:  tax-free cashannuity 

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