Taking your tax-free cash up front with The People’s Pension

You can take 1 lump sum a tax month. For example, from 6 May to 5 June. We don’t charge you for taking lump sums. More about taking your tax-free cash gradually

You must take a minimum of £200 each time you take a lump sum from your flexi-access drawdown account with The People’s Pension – you can’t normally take less than £200 at a time.

However there are 2 exceptions:

• If you get to a point where you’re left with less than £200 in your flexi-access drawdown account. You can request a final withdrawal of what’s left in your account even if it’s less than £200. The full amount will be taxed just like your other flexi-access drawdown withdrawals. If you’ve no more money left in your pension pot with The People’s Pension after this final withdrawal, your flexi-access drawdown account will be closed.
• Due to daily changes in unit prices, the proceeds from the selling of these units may be higher or lower than the withdrawal amount you’ve requested. This means that you may receive less than the minimum withdrawal of £200.

Some providers offer a flexible retirement income plan through flexi-access drawdown. This normally involves setting up regular payments, which are paid into your bank account by direct credit. But the income payments stop when your money runs out. And because it’s paid to you automatically, your money could run out without you realising it’s getting low. With our flexi-access drawdown account, you can keep an eye on your balance through your Online Account. And you have to consciously log in and request a lump sum in order to take any money out. This gives you the opportunity to think carefully each time you make a withdrawal – about how much you want to take out and how long it needs to last. With any flexi-access drawdown arrangement, if you take too much too quickly, your money could run out.

If you’re still going to be working after you start taking money from your pension pot, you might want to continue saving into a pension to make the most of your employer’s contributions. Or even if you’re not going to be working, you might want to continue making your own contributions. Any future contributions paid into your account with The People’s Pension won’t go straight into flexi-access drawdown. Instead, your money will go into your pension pot with us, and start building up your pot again. So it’ll be separate from your money in your flexi-access drawdown account with us – and you’ll be able to keep an eye on both balances through your Online Account. Then, once you’ve built your pot back up to £2,000 or more – you can take another 25% as tax-free cash, with another £3 for every £1 taken moving to your flexi-access drawdown account.

Taking tax-free cash won’t affect the amount you or your employer can contribute, but once you start taking money from your flexi-access drawdown account, the amount you or your employer can contribute will reduce to £10,000 a year as the Money purchase allowance (MPAA) will be triggered.

More about continuing to save

You can nominate someone (or more than one person, or an organisation) to receive your pension savings if you die – called your ‘beneficiary’. If you’ve already nominated a beneficiary for your pension pot with The People’s Pension, the same beneficiary will be registered for your flexi-access drawdown account with us. With The People’s Pension, our trustee will consider your wishes and any money we pass on to your beneficiary would be paid to them as a single lump sum – we can’t pay it to them as an income, or carry on investing it on their behalf. More about what happens to your pension savings when you die

With the money in your flexi-access drawdown account, you can leave it invested or take withdrawals from it. You should continue to monitor how your money is invested in the available investment funds. You don’t have to stay in the flexi-access drawdown account, or with the same provider, for the rest of your retirement. You could choose to transfer your pot to another flexi-access drawdown provider, or buy a guaranteed income. More about mixing your options

Different providers offer different versions of this option, so you might want to shop around to find the best deal for you. There’s a lot of jargon in the pensions industry, and we understand that this can make it difficult to compare your options across different providers – because unfortunately not everyone uses the same terminology. To make it easier for you to compare, here’s a few different ways this option is often described:

• Taking your tax-free cash up front
• Taking lumps sums from a flexi-access drawdown account
• Flexi-access drawdown or flexible retirement income
• Moving your money into drawdown, or drawing-down your pension savings

Check out our pensions jargon buster

• There’s a risk you won’t have enough money to live off in your retirement – or that your money could run out too soon if you take too much too quickly. So you need to plan carefully and work out how much you’ll need.
• There’s a risk you could pay more tax than you planned for. So make sure you understand the tax consequences and consider your personal tax circumstances.
• When you take your first taxed lump sum as an income (after your initial 25% tax-free cash), you’ll have a reduced money purchase annual allowance. Find out more about this if you plan on continuing to save.
• If you have protected tax-free cash entitlement that allows you to take more than 25% of your savings as tax-free cash, you may lose this protection if you decide to take your tax-free cash a bit at a time.
• If you get any means-tested benefits, taking your pension savings could affect your entitlement to these. Find out more about this on the government website.
• If you have any unsecured debts or creditors, the money you take from your pension savings may be available to your creditors to satisfy any debts you have.
• There’s a chance there’s a better deal out there for you. So you should shop around and understand all your options. But make sure you avoid pension scams too.
• With The People’s Pension, there is an annual management charge made up of 3 elements – an annual charge, an ongoing management charge of 0.5% (50p for every £100 saved) and a rebate on the management charge. The rebate level depends on how much is in your pension pot. When you take money out, we’ll work out future rebates on the value of your remaining savings. The annual charge is not deducted from flexi-access drawdown accounts. Read more about our member annual management charge. To find out exactly how much you’re charged, please log into your Online Account and go to ‘Manage my pension’, followed by ‘Charges’.

Before you take your pension pot a bit at a time with The People’s Pension, we recommend you read:

• our booklet – Your options at retirement
• MoneyHelper’s booklet – Your pension: your choices
• and The Pensions Regulator’s booklet on avoiding pension scams.

We also recommend you get in touch with the government’s Pension Wise service for free and impartial guidance on your options. Plus, you might want to consider getting some advice from a financial adviser. More about your guidance and advice options

If you’re ready to take your pension pot a bit at a time (and as long as you’re 55 or over) – the quickest way to request this is through your Online Account.

Find out how to take your pension money