Can I take a lump sum but still continue to contribute?

RM2000

I’m still working and not planning to retire for several years. However, I’m wondering if I can take a lump sum from my workplace pension and still continue to contribute?    If I can do this, does the pension automatically become a drawdown fund (because, ideally, I’d like to use it to buy an annuity whenever I do retire).  I’m over 55 and have one other pension (final salary scheme with a different company which I will not be touching).

Many thanks for any advice.

Dazed_and_C0nfused

RM2000 said:

I’m still working and not planning to retire for several years. However, I’m wondering if I can take a lump sum from my workplace pension and still continue to contribute?    If I can do this, does the pension automatically become a drawdown fund (because, ideally, I’d like to use it to buy an annuity whenever I do retire).  I’m over 55 and have one other pension (final salary scheme with a different company which I will not be touching).

Many thanks for any advice.

Will this lump sum just a TFLS or a mix of TFLS and taxable income?

RM2000

It will be a TFLS only 

Dazed_and_C0nfused

RM2000 said:

It will be a TFLS only 

That has no impact on your future contributions.

RM2000

Does the pension automatically become a drawdown though, once I take that money, or are all options still open as long as I don’t exceed the TFLS?

Dazed_and_C0nfused

RM2000 said:

Does the pension automatically become a drawdown though, once I take that money, or are all options still open as long as I don’t exceed the TFLS?

The remaining 75% will become crystallised and whatever that ends up as is all taxable when taken out of the pension.

For example, say you take a £10k TFLS out of your DC pension then you will crystallise £40k.  £10k is the TFLS and £30k is the taxable element.  If you leave that taxable element within the pension and it grows back to say £38k then the whole of that £38k is taxable when you come to take it out of the pension wrapper.

Linton

Although there is no legal reason why you would not be able to withdraw tax free money from a pension whilst continuing to contribute your employer's scheme may not support it.  You would have to check with them.

Cobbler_tone

I’m assuming you want/need the lump sum, or else I’d consider leaving it there until you retire or need it.
As per previous poster, make sure you check carefully if you do take it as workplace schemes can be inflexible. For example, they may not let you pay into that one anyone or worst case lose employer contributions. In my experience employers either don’t have the systems to support via payroll, or simply don’t want the faff!

RM2000

Thanks for all the info. It’s more complicated than I first thought!

TCA

You might want to check out the pension recycling rules in case that impacts you:

https://www.unbiased.co.uk/discover/pensions-retirement/managing-a-pension/pension-recycling-what-is-it-and-what-are-the-rules