If you’re age 55 or over (or earlier if you’re retiring due to incapacity), you can take out lump sums or an income from your pension pot as and when you like. The People’s Pension offer two ways of flexibly accessing your pension savings.
Taking your tax-free cash up front – flexi-access drawdown
The first way of taking your pension pot a bit at a time is to take 25% tax-free cash at the start and move the remaining 75% into a separate account.
Then, each time you take money out of that account, you’ll pay tax on the full amount of each lump sum. With flexi-access drawdown your money purchase annual allowance (MPAA) isn’t triggered when you take the initial 25% tax-free cash, it’s only triggered once you take your first withdrawal.
Taking your tax-free cash gradually – UFPLS (uncrystallised funds pension lump sum)
The second way to take your pension pot a bit at a time is to take your tax-free cash gradually.
So each time you take money from your pension pot, 25% of it is tax free and you pay tax on the other 75% of each lump sum. If you take your tax-free cash gradually your money purchase annual allowance (MPAA) is triggered when taking your first lump sum.
These options will work differently for different people, depending on a whole range of circumstances and factors. That’s why we always recommend you get guidance and advice as well as doing your own research.