Pension Commencement lump sum
Click here to find out about the changes to SIPP regulations.
A proportion (usually 25%) of your accumulated pension fund can be drawn at retirement (anytime after age 55),currently free of any tax – hence the usual description of “tax-free lump sum”. The drawing of this cash sum is sometimes referred to as “commuting” or “commutation” of your pension.
The rules governing the size of the pension commencement lump sum have been simplified for all pensions:
Defined benefit and Defined Contribution occupational schemes
The maximum pension commencement lump sum available to you is now 25% of the value of benefits..
If you seek to ever transfer a plan with an entitlement in excess of 25% x pension fund, in order to enjoy scheme specific protection and retain this higher tax-free cash entitlement, the transfer must be a “block transfer”. A block transfer essentially transfers two or more members’ benefits in a single transaction to the same registered pension scheme.
 Tax benefits of pensions |
