The 25% Tax-Free Pension Lump Sum Explained
You can take 25% of your pension pot tax-free from age 55 — capped at £268,275. Taking it all at once is rarely the best move.
The Pension Commencement Lump Sum (PCLS) is the 25% you can take from a defined-contribution pension free of income tax. The maximum is £268,275 — 25% of the old Lifetime Allowance.
Take it all at once?
Only if you have a specific need (mortgage payoff, business investment). Otherwise, taking 25% of each withdrawal — 'UFPLS' — keeps the rest growing tax-free inside the pension.
Tax on the other 75%
Taxed as income at your marginal rate. Stay under £50,270 total income to avoid higher-rate tax.
Estimate how big your pension pot will be at retirement and how much sustainable monthly income it could produce.
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