How much can you take as a pension lump sum ?

This is undoubtedly one of the most frequent questions asked by visitors to the Best Pension Annuity website. The simple answer is that if you qualify to take pension benefits then, while the majority of people will be limited to 25% of their pension fund value, there will be some customers who could take 100% of their fund as a lump sums or series of lump sums.

Rather than give long and possibly confusing explanations, visitors to the website can access the pension lump sum calculator which askes 4 simple questions. Based on your answers to these questions you will be presented with a result that will tell you if you can take a lump sum from pension, how much you can take and how much of it will be paid tax free. The questions are straightforward and any customer should be able to answer them.

The pension lump sum calculator looks to cover every possible outcome and explains why you have been presented with the result specific to you. The key outcomes of the calculator are :

No pension lump sum : This means that you are not eligible to take a lump sum at the present time. This may change as you get older – you just can’t legally take one now !

Standard 25% lump sum : The vast majority of pension plan holders in the UK will be limited to a lump sum that is equivalent to one quarter of their entire pension fund value. There is no income tax payable.

100% Lump Sum – Flexible Drawdown : Customers who have certain levels of guaranteed income will be able to exercise certain rules to take all of their pension fund or a series of lump sums.

100% Lump Sum – Trivial Pension : Customers with very small pension provision can also take all of their fund as a lump sum if the value of the fund is below the government limit and they are aged 60 or over.

The calculator will also identity customers who would qualify for Trivial Pension in a few years time.

In all cases when a customer can take more than 25% of their pension fund as a lump sum, the first 25% will be paid free of tax while the remaining 75% will be taxed as income at a customer’s marginal rate.