If you’re age 55 or over (or earlier if you’re retiring due ill health), and you have more than £10,000 in your pension pot with us, you can take out lump sums. 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 up to 25% tax-free cash up front either in chunks or in one go. Under HMRC rules, for every £1 you take as tax-free cash, £3 will be moved to a flexi-access drawdown account that we’ll set up for you.
Then, each time you take money out of your flexi-access drawdown account, you may pay income 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 from the remaining balance of the 75%.
Spreading your tax-free cash across all withdrawals– UFPLS (uncrystallised funds pension lump sum)
The second way to take your pension pot a bit at a time is to spread your tax-free cash across all withdrawals.
So, each time you take money from your pension pot, usually 25% of it is tax free and the remaining 75% of each lump sum is taxable. If you spread your tax-free cash across all withdrawals, 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.