Planning to crystallise DC pension to access enhanced Tax Free Cash - any disadvantages?

Cali369

I'm 58, no longer working (or planning to again), small income from property but less than the personal allowance.  I'm married but don't have children so not worried about IHT & no mortgage.  Living off husbands DB pension and savings currently.

My DC company pension has an enhanced tax free cash amount (currently valued at £200k).  But I can only access the enhanced TFC if I crystallise the whole pot into drawdown thus releasing the TFC.  I can't take UFPLS or crystallise part of the fund without losing the enhanced TFC.

Current plan is to crystallise the whole fund to access the TFC, we're about to start a major house renovation so I wouldn't have to worry about where to invest the TFC longer term as the plan is for majority of it to be spent over the next year, but realise I'll have to pay some tax on the interest in the meantime

Any other downsides or gotchas I haven't thought of?

TheGreenFrog

You are fortunate to have a drawdown option - some company schemes do not have that as an option.

QrizB

Do you and your husband have a plan to fund your ongoing existence until you're both centenarians? Regardless of which one of you dies first, or when, or if one of you decides in your 70s to run off with the postie and get a divorce?

And does that plan require the £200k?

If it doesn't, then I can't see any problems with spending it all now.

Cali369

TheGreenFrog said:

You are fortunate to have a drawdown option - some company schemes do not have that as an option.

Yes, was lucky that my company pension switched in Dec 2023 to L&G Mastertrust because the old Fidelity didn't have drawdown.

Cali369

QrizB said:

Do you and your husband have a plan to fund your ongoing existence until you're both centenarians? Regardless of which one of you dies first, or when, or if one of you decides in your 70s to run off with the postie and get a divorce?

And does that plan require the £200k?

If it doesn't, then I can't see any problems with spending it all now.

Yes, we both have healthy DC pots as well as his DB.  Plus capital in the rental property (no mortgage) and in our main house which we would downsize if necessary so no requirement for the £200k. 

I had planned to 'lose' the enhanced amount and leave the TFC to grow and use UFPLS if necessary but I have a couple of other small pensions too and so I don't actually have much headroom up to the LSA of £268k