Pension Commencement Lump Sum

The total tax free lump sum paid to an individual from all pension arrangements can t exceed 25 of the standard lifetime allowance except where the lump sum is protected.

Pension commencement lump sum. An excluded lump sum is not a pension commencement lump sum but is an unauthorised member payment to the extent that the individual s lifetime allowance is not exhausted. What is the pension commencement lump sum. For those who were born after 1957 or hired after 1997 they use a combination of short. Where a lifetime allowance charge has been overpaid or paid erroneously a further pension commencement lump sum may be paid in respect of that charge.

If you do not opt for the lump sum you will lose the lump sum option and you will begin to receive your pre determined monthly pension. Recycling of your pension tax free lump sum pcls happens when you use that lump sum as the means to increase contributions significantly to a pension scheme. If you re a member of a defined benefit pension scheme the scheme s rules will determine how much you can receive as a pcls. What is a pension commencement lump sum pcls.

When you access your pension in addition to an income you might receive a tax free lump sum often known as a pension commencement lump sum or pcls. The pension commencement lump sum refers to the lump sum of money you can withdraw from your pension pot as a tax free amount. When you can start drawing benefits from your pension scheme you may be able to take part or all of your pension benefits as a tax free cash lump sum called the pension commencement lump sum pcls. As many of you know there are two categories of employees when it comes to their pension lump sum options.

Pcls which is often known as tax free cash or a tax free lump sum is a tax free payment which most people can receive when they start accessing their pension benefits. In this case standard pension commencement lump sum pcls entitlement is defined in relation to a person s remaining lta. For pension commencement lump sum purposes the 120 000 flexi access drawdown fund used to purchase the annuity is excluded from the applicable amount calculation. It is normally 25 of the value of the pension benefits being accessed.

This causes an overlap between different pension rules. When it comes to pensions this term is pretty straightforward it almost describes exactly what it means.