In some cases the best way to take money out of your pension is to take a series of lump sums over time, instead of taking all the tax-free cash in one go. When you do this, 25% of whatever you withdraw is free of tax while the other 75% of the money you withdraw will be taxed like any other earned income you receive. This way, you can make multiple withdrawals.
When you do this, it’s called taking an Uncrystallised Funds Pension Lump Sum (UFPLS for short).
You can leave your money in your pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option.
The Government offers a free and impartial guidance service to help you understand your options at retirement. This is available via the web, telephone or face-to-face through government approved organisations, such as The Pensions Advisory Service and the Citizens Advice Bureau. You can find out more by going to pensionwise.gov.uk or by calling Pension Wise on 0800 138 3944.
When you withdraw money from your pension, this money may be subject to income tax. Use our calculator to help you understand how much tax you might have to pay.
Our retirement specialists can help you get ready for retirement, by supporting every aspect of your plans – from choosing the right income for your needs to making sure your money lasts.
Fidelity's retirement service has retirement specialists who are able to provide both guidance and advice. The service we offer is based purely on helping you find the most appropriate solutions for your personal circumstances. Call us on 0800 368 6882
If you think you might want to top up your pension pot in the future, for instance because you want to keep working part time, then you need to be aware that taking money out using UFPLS could affect the amount you can pay in and receive tax relief on.
If you think you’ll want to continue topping up your money purchase pension pot with more than £4,000 a year after you retire, then you may want to consider other options.
If you take money out in this way, you may only be able to receive tax relief on up to £4,000 a year. If you exceed this figure, you may need to pay tax to HMRC. This is known as the money purchase annual allowance (MPAA).
For more information please review our money purchase annual allowance guide.
Find out more about taking lump sums from your pension, or contact Fidelity’s retirement service for more information on 0800 368 6882.
The value of investments can go down as well as up, so you may get back less than you invest. This information is not a personal recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s Retirement Service on 0800 084 5045 or refer to an authorised financial adviser. Pension money cannot normally be withdrawn until age 55.