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How to take your tax free cash

One of the main tax advantages of saving through a pension is the option to take tax free cash when you come to access those savings.

Important information

Please remember the value of your investments and any income from them can go down as well as up and you may get back less than the amount you originally invested.

Related documents

Visit our dedicated SIPP literature page.

The minimum age you normally have to be to access your pension savings.

How much tax free cash can I take?

Normally, you can take up to 25% of your pension tax free.

The only time you might not be able to take the full 25% is if you exceed your life time allowance for pension savings across all your pension schemes. At the moment this is £1 million (although some individuals may have a higher allowance than that). Please read our Accessing Your Pension Savings guide for more information.

You have to pay an extra tax charge on any amount you take out above your lifetime allowance.

Important information

Before you choose a SIPP, make sure you understand its aims and risks. Alliance Trust does not give advice. If you are unsure whether our SIPP is suitable for you, of the risks and commitments of investments and or of how much income to take and when, you should seek professional financial advice specific to your particular circumstances.

Read our guide to accessing your pension savings

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How can I take my tax free cash?

You can take it all at once, or you can take it in stages. Let’s say you have £200,000 in your pension.

Here are some options you could consider.

Remember, if you use flexi-access drawdown to take an income on top of your tax free cash the money left in your pension is still invested so the value can go down as well as up. Another option is to take your tax free lump sum and then buy an annuity, which tends to involve less investment risk.

*A word about Uncrystallised Funds Pension Lump Sum (UFPLS)

You don’t have to take out all your savings at once if you decide to use the UFPLS method to access them. You could take out a series of UFPLS lump sums. In each case, 25% would be paid tax free with the balance taxed at your marginal rate(s).

Before deciding what to do, we strongly recommend that you use the free, impartial government guidance service Pension Wise, or get professional financial advice.

Important information

Laws and tax rules may change in the future without notice. The information here is our understanding in April 2016. This information takes no account of your personal circumstances which may have an impact on tax treatment.

Free guidance

The ’Pension wise’ guidance service is a free impartial government service for anyone thinking of accessing their pension savings. It gives you details of your options and guidance to help you make up your mind what to do. We remind you about Pension wise before your planned retirement age.

Get free, impartial guidance on your options.

Pension wise

How much could your SIPP be worth?

Use our savings tool to work out how much you might be able to save for retirement.
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Alliance Trust Savings Limited is a subsidiary of Alliance Trust PLC and is registered in Scotland No. SC 98767, registered office, PO Box 164, 8 West Marketgait, Dundee DD1 9YP; is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority, firm reference number 116115. Alliance Trust Savings gives no financial or investment advice.