Crystallised funds

clacky100

Could someone tell me in simple terms what is meant by crystallised funds and un crystallised funds
Many thanks

Dazed_and_C0nfused

https://www.pensionthepennies.app/help-centre/difference-between-crystallised-uncrystallised-pensions/

HeyYeah

If you have a DC pension then it is invested in a number of funds (uncrystallised funds). When you decide to retire you can access those funds, but to do so you have to 'crystallise' those funds. In the simplest case that would mean taking 100% of your uncrystallised funds and telling your pension company that you want to crystallise them. You would then receive your 25% tax-free cash leaving the other 75% still invested but 'crystallised' waiting for you to take it as income i.e. drawdown.

However as with everything with pensions, it can be more complex. There are other ways to crystallise your pension benefits, such as only moving part of your funds from the uncrystallised to the crystallised pot. If you do this then each time you crystallise you will receive some of your tax-free cash AND crystallised funds (still in a 25:75 ratio) rather than getting it all at once (flexi-access drawdown). Alternatively there are other methods to crystallise rather than drawdown (such UFPLS) which I won't go into here.   

Crystallising and drawing income from your pension in drawdown comes with some tax implications and implications on how much money you can invest into your pension in the future, so make sure you understand all of that before doing anything. The government site pensionwise offers some useful information and phone consultations (but not advise). 

https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise/pension-pot-options

Novice_investor101

I’ll go for the simplest form of answer. 

For a DC pension. Uncrystalised pot you can still take tax free cash from. Crystalised pot you’ve already taken the tax free part of it & anything in this pot is now taxable upon withdrawal. 

You can hold both types at the same time. 

Albermarle

As an example.

You have £100K in your pension that you have built up and now you want to start taking money from it . As you know you can take 25% tax free.
The £100K is uncrystallised . If you crystallise the lot , you will get £25K tax free and £75K is left crystallised. This means that any money taken from it is taxable .
OR
You could just crystallise half of it . So then you would have £50K still uncrystallised , £12.5 Tax free and £37.5K crystallised.

Marcon

https://www.pensionbee.com/pensions-explained/pension-types/what-is-a-crystallised-pension

atw_uss

Just to add to this question, do all pension companies allow partial crystallisation, or only certain ones (i.e. it might be necessary to change company if opting for the latter option)?

Albermarle

atw_uss said:

Just to add to this question, do all pension companies allow partial crystallisation, or only certain ones (i.e. it might be necessary to change company if opting for the latter option)?

No , not all companies allow it , mainly due to IT issues .
If you have an older pension , it might not even be able to facilitate drawdown at all. In which case you might only have the options of an annuity , or take the whole lot at once , or transfer it out .