Taking your tax-free lump sum up front with People’s Pension

You can take 1 withdrawal a tax month either as a lump sum or regular income. For example, from 6 May to 5 June. More about taking your tax-free entitlement gradually

No, we don’t charge you for taking withdrawals.

For a lump sum withdrawal from your flexi-access drawdown account, you must take at least £200 each time.

For a regular income, you need to have a minimum of £1,500 in your flexi-access drawdown account to first set this up and then you must take a minimum of £50 per month.

However, there are 3 exceptions:

• If you get to a point where you’re left without enough money to take a lump sum withdrawal (less than £200) you can request a final withdrawal of what’s left in your account. The full amount will be taxed just like your other flexi-access drawdown withdrawals.
• 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 lump sum withdrawal of £200.
• With a regular income your final payment may be slightly more or less than your normal income based on how much you have left in your flexi-access drawdown account, investment fund performance and how we calculate your final payment.

When your flexi-access drawdown account is empty, we’ll close this account. But, if you have any money in your pension pot, it can be re-opened in the future by taking more tax-free lump sums which will move more of your money over. This means you can then take more lump sums or start a new regular income.

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 will be paid into your pension pot with People’s Pension, it won’t go straight into flexi-access drawdown. Then, once you’ve built your pot back up to £2,000 or more – you can make another withdrawal – with 25% paid directly to you as a tax-free lump sum and the rest being paid to your flexi-access drawdown account. You’ll be able to keep an eye on both balances through your online account.

Taking a tax-free lump sum won’t affect the amount you or your employer can contribute into your pension pot, but once you start taking money from your flexi-access drawdown account, the amount you or your employer can contribute, while benefiting from tax relief, 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 be considered to receive your pension savings if you die – called your ‘beneficiary’. If you’ve already nominated a beneficiary for your pension pot with People’s Pension, the same beneficiary will be registered for your flexi-access drawdown account with us. With 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

The money in your flexi-access drawdown account will stay invested until you choose to withdraw it. It can be withdrawn as either a lump sum or a regular monthly income.

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. If you continue to build up your pension pot with us, there could be more options available to you. 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:

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

• There’s a risk you won’t have enough money to live off in your retirement – or that your money could run out earlier if you take too much too quickly. So you need to plan carefully and work out how much you’ll need. You can use our calculators (found in your online account) to help. Our retirement planner can work out how much income you may need and could have in retirement. Whereas our regular income planner can work out how much money you can take each month or what age your regular income could last until..
• 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 withdrawal as a lump sum or regular income (after your initial 25% tax-free lump sum), you’ll have a reduced money purchase annual allowance. Find out more about this if you plan on continuing to save.
• If you’re entitled to take more than 25% of your pension as a tax-free lump sum, you would lose this protection if you don’t take it all in one go using flexi-access drawdown. You can contact us for more information.
• 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.
• Make sure you’re aware of how to avoid pension scams.

Before you take your pension pot a bit at a time with 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 leaflet 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 meet your minimum retirement age) – the quickest way to request this is through your account.

Find out how to take your pension money