Introduction to Releasing Cash from Pensions
Published / Last Updated on 15/11/2023
The minimum age you can access your pension fund to release cash or income is currently age 55. This increases to age 57 from April 2028.
- You cannot access your pension fund before this and if you are approached by a ‘pension buster’ know that this is illegal, you will face tax penalties and it could even be a fraud and you lose your whole pension.
- You can also access your pension fund before age 55 (57) if you are diagnosed as terminally ill with less than 12 months to live.
Basis Routes to Release Cash from Pensions
- Tax Free Cash release only via flexible access drawdown usually up to 25% of the fund value (unless you have a protected higher lump sum). This is tax free in the UK but may be taxable where you live (if overseas).
- Taxable Cash release (ad hoc or regular) via flexible access drawdown.
- Small Pots: If your pension fund is worth less than £10,000, you can cash the whole lot in (25% tax free, 75% has tax withheld at 20% basic rate tax). You can then reclaim overpaid taxes or pay more tax if a higher rate 40% or additional rate 45% taxpayer. The number of times you can do this is a maximum of 3 times for personal pensions unless you have several workplace pensions where the number of times you can use small pots rules is unlimited.
- Uncrystallised Funds Pension Lump Sum: UFPLS this is where you cash in the whole of a pension fund worth more than £10,000 (25% is tax free and 75% has tax withheld at emergency tax rates). You can then reclaim overpaid taxes or pay more tax if required. There is no limit on the number of times you can us UFPLS.
- Normal Retirement: Release 25% lump sum and buy an annuity income with the balance.
- Normal Retirement: Release 25% lump sum and use flexible access drawdown for more capital/income when needed.
- Triviality Rules for smaller defined benefit pension schemes (final salary/career average salary).
See More on Small Pots Small Pension Cash In and Triviality Rules Trivial Pension Cash In
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