How It Works
You can take smaller sums of cash from your pension when you require it, how much you withdraw and when you do so is up to you. This is known as Un-crystallised Funds Pension Lump Sum (UFPLS). Each time you withdraw a sum of money, 25% is tax-free with the rest classed as taxable income.
How Much Tax Will I Pay?
Three quarters of each cash withdrawal counts as taxable income and this will be added to the rest of your regular income. If you take lots of large cash lump sums or a single lump sum, depending on how much your total income is, this could result in you paying a higher rate of tax than you normally would.
Things To Consider
Your pension pot will reduce each time you make a withdrawal, so the earlier you begin making withdrawals the sooner your pension pot will run out. Some pension providers charge a fee for each withdrawal, which will eat into your remaining fund. As your remaining fund does not get re-invested, it may not grow enough to provide you with an income to take you into later life or provide for any dependant after your death.FIND OUT MORE