Making a withdrawal from your pension plan

Annuity

Some of our pension plans include safeguarded benefits such as Guaranteed Minimum Pension (GMPs) and Guaranteed Annuity Rates (GARs). These typically provide you with an income for life.

Most annuities allow up to 25% tax-free cash, with the remainder of your income taxable at your personal rate.

If you don’t have any guarantees as part of your plan, you still have the option to buy an annuity.

Flexi-access drawdown (FAD)

This option allows you to take a regular income or occasional withdrawals whilst your pension pot remains invested.

You can take an initial tax-free lump sum of up to 25% of your pot. Just note that any money you access after this will be subject to tax at your personal rate.

To take a flexi-access drawdown, you’ll need to speak to a Specialist Financial Adviser from Wesleyan Financial Services.

If you’d like to learn more, you can read our guide to flexi-access drawdowns.

100% UFPLS (Uncrystallised Fund Pension Lump Sum)

This allows you to take all your pension savings as a single cash lump sum. You can take a total of 25% of your pension pot tax-free, with the remaining 75% subject to income tax.

Taking a lump sum could push you into a higher tax band, which is something to be aware of and factor into your retirement income planning.

Partial UFPLS

This option allows you to take up to six partial UFPLS per calendar year. For each withdrawal, you’ll get 25% tax free with the rest taxed at your personal tax rate.

If you're interested in taking your pension this way, we'll provide you with details on how this withdrawal will impact your remaining pension savings.

To learn more, you can read our guide on cash lump sums.

Small pots

If your pension plan is valued at £10,000 or less, you can take this as a ‘small pot’. 

The key difference between this and other options is that you’ll get 25% of your cash tax-free with the remaining amount taxed at just 20%.

Depending on how you take your pension, you could trigger the Money Purchase Annual Allowance (MPAA). This will affect you if you’re looking to continue contributing to your pension after you’ve started drawing from your pot, as it reduces your contribution limit to £10,000 each year as opposed to the annual allowance of £60,000.

Accessing your pension early may also impact your retirement income, as you could end up with less to live on when you retire. This will in turn affect your lifestyle in retirement unless you have other income streams to fall back on.

For free guidance on taking money from your pension, you can visit Pension Wise

If you’re looking to access your pension due to financial hardship, you can visit our cost of living hub for additional information and links to helpful websites.