Taking lump sums
You can leave your money in your pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option.
In some cases, the best way to take money out of your pension is to withdraw a series of lump sums over time, instead of taking all the tax-free cash in one go. When you do this, 25% of what you withdraw is free of tax while the other 75% is taxed like any other income you earn. This way, you can make multiple withdrawals.
When you do this, it’s called taking an Uncrystallised Funds Pension Lump Sum (UFPLS for short).
Things to consider
Calculate tax on withdrawals
Understand how much tax you might have to pay on the money you take from your pension and how it could affect your future retirement income.
Taking lump sums will affect your future contributions
If you think you might want to top up your pension pot in the future, for instance because you want to keep working part time, then you need to be aware that taking money out in lump sums could affect the amount you can pay in and receive tax relief on.
If you take money out in this way, you may only be able to receive tax relief on up to £4,000 a year. If you exceed this figure, you may need to pay tax to HMRC. This is known as the money purchase annual allowance (MPAA).
If you think you’ll want to continue topping up your money purchase pension pot with more than £4,000 a year after you retire, then you may want to consider other options.
Find out more about the money purchase annual allowance and how it could affect you in our guide.
The value of investments can go down as well as up, so you may get back less than you invest. Tax treatment and eligibility to invest in a pension depend on personal circumstances. All tax rules may change in future. The minimum age you can normally access your pension savings is currently 55, and is due to rise to 57 on 6 April 2028, unless you have a lower protected pension age.
This information is not a personal recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure about the suitability of a pension investment, retirement service or any action you need to take, please refer to an authorised financial adviser.
Workplace Investing Service Centre
If you’re unsure about any of your retirement income options and would like to find out more about your BNP Paribas Pension, call our Workplace Investing Service Centre on 0800 3 68 68 68.