Phased retirement

When you retire you don’t have to stop working immediately or fully, and you don’t need to commit to buying an annuity income for life or a drawdown plan in order to withdraw money from your pension pot.

Withdrawing a single or multiple lump sums from your pension pot


The new “pensions freedoms” rules introduced in April 2015 mean that it is now much easier to draw down lump sums from your pension pot as and when you need them.

Drawing a lump sum from your pension pot while it remains invested is called taking an Uncrystallised Pension Fund Lump Sum (UPFLS). “Uncrystallised” refers to a portion of your pension pot that:

  • has not had a tax-free lump-sum taken from it, and
  • is not providing you with an income.

When you make a UPFLS withdrawal you’ll usually be entitled to take 25% of the withdrawal tax-free, provided that your overall pension pot has not exceeded the Lifetime Allowance. The remainder of the lump sum is taxable at your marginal Income Tax rate.

You can take your entire pension fund in one go as a UPFLS withdrawal, or you can take a series of smaller UPFLSs, leaving the remainder of your pension pot untouched.

Example of UPFLS withdrawal

  • You have a £200,000 pension pot and you decide to take a £10,000 lump sum as an UPFLS withdrawal
  • You’ll usually be able to take £2,500 as a tax-free lump sum (25% of £10,000)
  • The remaining £7,500 is subject to Income Tax.
  • You’ll then have £190,000 remaining in your pension pot, uncrystallised.
  • Your Annual Allowance is now reduced from £40,000 to £10,000 per annum.

Alternative ways to withdraw money from your pension pot

UPFLS withdrawals can be useful if you don’t want to take the whole of your 25% tax-free lump-sum at once.

Alternatively you can take your 25% tax-free lump sum and use your pension pot to buy an annuity or start pension drawdown.

You also have the option to use a combination of the above to suit you. Read our guide to retirement options for more information

Advice if you're not sure

Financial planning for retirement is a big decision. There are lots of consequences to think through, and financial rules to be aware of.

If you're in search of qualified, expert advice we can help you find a nearby financial adviser. You can usually talk to them at first without any cost, until the grounds for advice have been established.

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Last updated: 13 July 2016