If you’re taking a payment/cash lump sum from your pension pot (and you’re not taking your pot under the small pension pot rules), the first payment will be taxed using an emergency tax code. It ensures that you receive the basic personal allowance and it also assumes you’re entitled to 1/12th of this allowance each month but doesn’t take into account any other allowances or reliefs you may be entitled to. We’ll keep using the emergency tax code until HM Revenue & Customs (HMRC) tells us (and you) what your correct tax code should be. This means the amount you receive from us may not be the full amount you’re due as we’ve had to deduct tax at a higher rate.
We’ll confirm the details of this payment so you can reclaim any overpaid tax from HMRC.