More about the All Cash option

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Overview Drawdown Income Annuity All Cash

Understanding the basics

Withdraw all of your Defined Contribution (DC) pension pot as cash lump sums
You can take your DC pension pot as one or two cash lump sums (split between two tax years). If you decide to take your DC pension pot as two separate cash payments, the first cash payment will be paid at your selected retirement date and the balance will be paid shortly after the start of the tax year following your selected retirement date, usually at the end of April. If you would like to take your DC pension pot as more than two lump sums, you will need to transfer your benefits out of the Scheme.
Take up to 25% of each lump sum tax-free
Normally 25% of each lump sum can be paid tax-free (up to the Lifetime Allowance), but the remaining 75% will be subject to income tax. Watch out because this could push you into a higher tax bracket as your income is not spread out.
Remaining cash from your lump sum will be included in your estate
No specific pension provision will be made for your partner or dependants after you die. However, any remaining cash from your lump sum would normally be included in your estate.

Things to think about:

Remember to factor in inflation when thinking about future plans
It’s up to you what you do with your cash lump sum(s), but you may want to think carefully about your plans. Don’t forget, inflation reduces the spending power of cash so you should think carefully before just leaving it in your current account for a long time.
Think about investing
You can invest the cash lump sum(s) outside of a pension arrangement, and use it as and when you wish. Remember, the value may fall as well as rise, depending on where/if you invest it.
Limited to the Money Purchase Annual Allowance
By taking the cash lump sum(s), the contributions that you or your employer can make tax efficiently to a DC scheme will be limited to the Money Purchase Annual Allowance.
No regular income will be provided
Taking your DC pension pot as one or two cash lump sum(s) will not provide you with a regular income and you will need to manage your spending and investments to make sure you have enough income throughout retirement.
You can’t change your mind
Once you have taken your first cash lump sum payment, you can’t ch ange your mind about taking all your DC pension pot as cash or about when you receive your second payment.
If you want to take more than two cash lump sums
If you would like to take your DC pension pot as more than two lump sums, you will need to transfer your benefits out of the Scheme.

The All Cash option and tax

You can normally take 25% of each cash lump sum tax free up to the Lifetime Allowance. The Lifetime Allowance (LTA) was the maximum amount that someone could save in their pension without incurring additional tax. The LTA has now been abolished and has been replaced by two new lump sum allowances.

From 6 April 2024, the total amount of your pension savings (across all your pension schemes) that can be paid as tax-free lump sums will be limited by the Lump Sum Allowance and the Lump Sum and Death Benefit Allowance. You can read more about this in the DC member guide.

Your 'Personal Allowance' is the income you can receive each year without paying tax. Any tax-free cash you take from your DC pot doesn’t count towards your Personal Allowance. Once you have taken your tax-free cash, the remainder of your cash lump sum will be taxed as income. It is added to any income you have from other sources in the tax year for calculating the rate and amount of tax to be paid.

If you decide to take your DC pension pot as cash and the value is more than £10,000, you will trigger the Money Purchase Annual Allowance (or MPAA). The MPAA limit for the tax year is currently £4,000 and, if triggered, any contributions that you or your employer make to your DC pension pot (or any other DC Scheme) that total more than £4,000 will be subject to a tax charge.

What should I do next?

If you are thinking about taking your DC pension pot and would like to get a retirement quote or request a retirement pack, you can do this by logging-in to My Pension. Once logged in, select the Quotes drop down menu. Please note you can only request a retirement quote if you are aged 54 or over.

Alternatively, you can contact the Scheme administrators directly.

Additional help to make your choices

Have you attended a retirement seminar or watched a retirement webcast?

Our retirement seminars/webcasts are designed for active and deferred DC members aged 50 and over, to help you understand more about your retirement income options. Look out for your invitation from WEALTH at work. Click to watch the full series of Retirement webcasts for DC members over age 50.

Have you tried our Pension Freedom Planner?

If you want to understand more about how much cash you could take, why not login to My Pension and use
the modeller called the Pensions Freedoms Planner

Quick links to external help sources

Visit Pension Wise and book an appointment to get more guidance before deciding whether Drawdown Income is right for you. Pension Wise is a free government backed service that offers impartial guidance for people with DC pension pots.

Visit The MoneyHelper to find a financial adviser to help look at your personal financial circumstances and help you to understand which products could best to meet your particular needs.

Explore the Retirement Options

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Retirement options overview

There’s plenty to think about when planning for retirement - do you need flexibility or income certainty? Be in control or hands-off? Would a combination of options be better? Our retirement options overview is a great place to start to understand the basics, compare the options and get extra pointers to help you decide.