Pension benefits overview

There are various restrictions and multiple ways to access a pension. As part of our Bitesize Technical series, Senior Technical Consultant, Lisa Webster explains the options for taking pension benefits.

Key insights on pension benefits

Normal minimum pension age

Currently, you need to be aged 55 or over before you can take pension benefits. This is known technically as the ‘normal minimum pension age’ (NMPA). From 6 April 2028 NMPA will increase further to age 57.

Withdrawal options

Lump Sums

Pension Commencement Lump Sum (PCLS): often referred to as ‘tax-free cash’. Typically, up to 25% of the fund can be accessed tax-free as a PCLS.

Uncrystallised Funds Pension Lump Sum (UFPLS): usually 25% tax-free, with the remaining 75% taxed as income.

Income options

Flexi-access drawdown: allows funds to remain invested while taking income as needed, either regularly or in ad hoc amounts. All withdrawals are subject to income tax.

Lifetime annuity: purchase an annuity from an insurance company, providing a guaranteed income for life, which is also subject to income tax.

Defined benefit schemes: these may offer a scheme pension calculated by the scheme actuary and paid directly from the pension scheme, subject to income tax.

Other pension payments

Less common payment options include those related to small pots, trivial commutation, and taking a pension when in ill-health.

More Bitesize Technical

Take a bite out of 'Pension commencement lump sums explained', the previous instalment of our pension benefits Bitesize Technical series, or start from the beginning, here.