When someone reaches retirement, they can take up to 25% of their pension as a tax-free lump sum (called the\u00a0‘pension commencement lump sum’). The remaining 75% has usually been used to\u00a0purchase an annuity, a financial product that provides them with a guaranteed income for life, or been left invested, allowing them to take a portion of their pension pot each year to provide an income \u2013 known as\u00a0‘income drawdown’.<\/p>\n
However, if their pension pot is quite small, they might feel that they would prefer to take all of it as a lump sum \u2013 this is what\u00a0trivial commutation\u00a0means. The entire pension pot can only be taken as a lump sum if it is below \u00a330,000. Up to three pension pots can also be taken that are no bigger than \u00a310,000 each as lump sums.<\/p>\n
When someone takes or trivially commutes their pension pot, the first 25% will be tax-free; however, they will have to pay Income Tax on the remaining 75%.<\/p>\n","protected":false},"excerpt":{"rendered":"
Taking all of a pension pot as a lump sum When someone reaches retirement, they can take up to 25% of their pension as a tax-free lump sum (called the\u00a0‘pension commencement lump sum’). The remaining 75% has usually been used to\u00a0purchase an annuity, a financial product that provides them with a guaranteed income for life,… Read more »<\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,5],"tags":[],"_links":{"self":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/posts\/1175"}],"collection":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/comments?post=1175"}],"version-history":[{"count":0,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/posts\/1175\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/media?parent=1175"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/categories?post=1175"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vizionwealth.co.uk\/news\/wp-json\/wp\/v2\/tags?post=1175"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}