Case study - Taking funds as a lump sum


• Mrs Patel, age 60.

 • £100,000 in SSAS.

 • Wants to draw £25,000 to fund her daughter’s wedding.

 • Doesn’t require any income yet.

Mrs Patel has two options as to how she can take her lump sum:

1. A tax-free pension commencement lump sum (PCLS) of £25,000. Once she has taken the cash she will have £75,000 in crystallised funds left in her pension which she will be able to start taking income from under flexi- access drawdown whenever she likes (subject to income tax at her marginal rate).

2. A lump sum that is part tax-free and part taxed. Mrs Patel could take a lump sum made up of a smaller part that is tax-free together with net pension income, so that the total she receives from both is £25,000. This would then still leave her with an uncrystallised fund value of £75,000. This is all uncrystallised and she can take further lump sum payments at a later date, or use the fund to take PCLS and an income under flexi-access drawdown. This second option leaves a larger proportion of the remaining funds as ‘uncrystallised’ so there is a bigger entitlement to a tax-free sum in the future. In addition, by leaving it in the pension, it will benefit from tax-free growth until the money is required.

Whichever option Mrs Patel chooses she can later use any funds remaining in her pension to purchase an annuity, should she wish to do so.

If you have any questions about this subject, please speak to your financial adviser.

This information is provided for information only, we do not provide advice.