Optimum method of accessing a pension with a Protected Lump Sum?

TSCati

I am planning on retiring in June 2026 and my pension pot could reach the £1,000,000 milestone by then.

My plan was to access my pension through a series of UFPLS payments but I have recently found out that I have a protected pension lump sum with one of my pension providers.

To make things simple, assume that this protection gives me the ability to withdraw 27% of the full £1,000,000 tax free, should I crystalise the whole pension pot or carry on with my UFPLS plan?

If I did take the full £270,000 tax free cash (assuming this is allowed as its greater than the £268,275), what should I do with the money?

I have investments in a GIA which I am transferring across to ISAs on an annual basis already and so I'm not keen on transferring the full amount into my GIA.  Some of the GIA is also earmarked to be given to my children to help with their first house purchases in the next 5 years or so.

Would building a collapsing index linked gilt ladder to provide a decent chunk of income during the first say 10 years of retirement be a tax efficient way of using the tax free cash?

The remainder of the money could be given to the children now, rather than in 5 years' time.

Any thoughts gratefully received.

DRS1

I have very little useful to say on this but do remember that if you have the protected lump sum for one pension and not for others then you need to view that pension in isolation.  You can't take more than 25% from the others.

So your UFPLS plan could still work for the others but may need tinkering for the one with the protection. 

dunstonh

To make things simple, assume that this protection gives me the ability to withdraw 27% of the full £1,000,000 tax free, should I crystalise the whole pension pot or carry on with my UFPLS plan?

That is a risky assumption and one you should get verified.   You dont say if your plan is an EPP or a Section 32 buy out bond but many of these cannot support UFPLS  using the protected TFC.

If I did take the full £270,000 tax free cash (assuming this is allowed as its greater than the £268,275), what should I do with the money?

protected tax-free cash (under both scheme specific tax-free cash and stand-alone lump sums) can be paid even where there is no available LSA.   However, you do have to be careful on how you take it in conjunction with other pensions (if any).  The order you take them is important.       LSDBA could come into play as well and you would need to calculate that.

You should do whatever fits your objectives.  You may decide to do nothing and leave it in the pension.

Marcon

TSCati said:

I am planning on retiring in June 2026 and my pension pot could reach the £1,000,000 milestone by then.

My plan was to access my pension through a series of UFPLS payments but I have recently found out that I have a protected pension lump sum with one of my pension providers.

To make things simple, assume that this protection gives me the ability to withdraw 27% of the full £1,000,000 tax free, should I crystalise the whole pension pot or carry on with my UFPLS plan?

If I did take the full £270,000 tax free cash (assuming this is allowed as its greater than the £268,275), what should I do with the money?

I have investments in a GIA which I am transferring across to ISAs on an annual basis already and so I'm not keen on transferring the full amount into my GIA.  Some of the GIA is also earmarked to be given to my children to help with their first house purchases in the next 5 years or so.

Would building a collapsing index linked gilt ladder to provide a decent chunk of income during the first say 10 years of retirement be a tax efficient way of using the tax free cash?

The remainder of the money could be given to the children now, rather than in 5 years' time.

Any thoughts gratefully received.

Given the amounts involved, how wise would it be to rely on free 'advice' based on just a few sentences of background information?

Maybe using some of your quarter of a million pounds to invest in proper (paid for) financial advice, based on a full understanding of your circumstances, would be a particularly good use of your funds?

DRS1

Scheme specific tax-free cash protection

You should read this. The bit at the end explains @dunstonh's point about the order in which you take benefits.