You can normally access your pension savings any time from your 55th birthday as and when you need them since the government introduced new rules in April 2015. However, retiring at a later date allows you to save more towards your retirement, which means you could get a higher retirement income. However, this isn’t guaranteed as the value of your pension could go up or down.

How can I make withdrawals direct from my pension pot?

There are two ways you can withdraw money direct from your pension pot:

  • Take an Uncrystallised Funds Pension Lump Sum (UFPLS), or
  • Make a withdrawal from a Flexi-Access Drawdown policy

An Uncrystallised Funds Pension Lump Sum, or UFPLS, is a withdrawal you make directly from a money purchase or defined contribution pension (you can’t make UFPLS withdrawals from a final salary or defined benefit pension).

There’s no limit to the amount you can take as a withdrawal, but here are some things you should be aware of:

  • The first 25% of your payment will be paid tax-free
  • The remaining 75% will be taxed in the same way as income you’ve earned. This means you could end up paying 40% or 45% tax on this portion of your withdrawal
  • If you take your money in this way the amount you can pay into other pensions each year (known as the annual allowance) will be reduced from £40,000 to £4,000
  • The payment will be measured against the lifetime allowance.  If your total pension savings are more than £1 million when measured then you’ll have to pay a tax charge

A Flexi-Access Drawdown policy allows you to take money out as and when you want to. You have the option to take your whole tax-free entitlement in one go before transferring the remainder of your pension pot into Flexi-Access Drawdown. This will mean any further withdrawals will be taxable.

There’s no limit to the amount you can take as a withdrawal, but here are some things you should be aware of:

  • The entire withdrawal will be taxed in the same way as income you’ve earned.  This means you could end up paying 40% or 45% tax on your withdrawal
  • If you take your money in this way the amount you can pay into other money purchase pensions each year (known as the annual allowance) will be reduced from £40,000 to £4,000
  • The payment will be measure against the lifetime allowance.  If your total pension savings are more than £1 million when measured then you’ll have to pay a tax charge
  • It’s not possible to pay money into a Flexi-Access Drawdown policy

Getting help

ReAssure is unable to provide financial advice or make a personal recommendation, but we can provide you with factual information about your policy and your options.

However, there are places you can go for help.

How does it affect me?

How can I find out how leaving my pension pot invested and making withdrawals as and when I need them could affect me?

You can use our Retirement Planning Toolkit to see how the different options available, including leaving your pension pot invested and making withdrawals as and when you need them, could look based on your own pension savings.