Should You Take Your Tax Free 25% Pension Lump Sum at 55?

If you’re approaching retirement and you are 55 or over, the current pension rules state that you can get access to 25% of your pension pot tax free. So the question is, should you be doing it? Should you take 25% of the total value of your pension as a lump sum, without paying any tax?

In this video I will explain the pros and cons of taking tax free cash from your defined contribution pension.

Other videos you might be interested in:

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As a Chartered Financial Planner at boutique retirement planning practice, MFP Wealth Management, I help successful people retire with complete financial confidence.

This video is for information and entertainment only. Nothing on this channel constitutes financial advice. Please do not make any decisions based on the contents of my videos; seek professional independent financial advice first!

[TheRetirementCafe]

Should you take your pension tax-free cash at 55?

[jessicasquire]

In the 1990s I sold pensions on the strenght that the tax free lump sum would pay off most if not all of the mortgage and leave the investor with a pension for life. Most were over a 40 year term plus, I was not alone

[GudrunScharrer]

I have been a dividend focused investor for a long time. This does not mean I don't own growth stocks, I do. A well rounded portfolio should be a mixture of both categories. One way to minimize the anxiety out of stock market investing, is to make sure you keep a large cash cushion. I invest in the market, but never put all my money in market.

[bigdee]

The problem in the UK is if you are the normal avarage person and you have a work pension in place by the time you retire you loose out on any help from the governent with energy bills and rent for most. The government see that you have a private pension in place and force you to pay your own way through your work pension. So it's counter productive to have a active works pension in place by the time you retire.

[Banthah]

Funny how people are saying take it or don’t take it, and no-one has spoken about maybe taking some of it.
You have the option to crystallise just some of your pension, take 25% of that amount, and leave the rest in the pot for later. Hopefully then it grows and you can crystallise again whenever you want, and take another tax free 25% lump sum of that amount.
You can do this as many times as you like and leave the rest of your pot uncrystallised to grow…
Everyone is different of course but this could be a much more tax efficient way of getting tax free cash continually, which should grow to a larger amount over time than taking the full 25% amount now

[Lillilady]

Ive just retired at 55 after 37 years, paying into west midlands pension fund all that time. I have the paperwork to send back with 2 options: a smaller pot but with higher annuity payments, or larger pension pot and smaller annuity payments. I want to pay off my credit card (under 2000), i have no car or house payment commitments. The interest rates are pretty good at the moment, should i tie up half the larger lump sum for 5 years, the other half with some access. Or take the smaller lump sum (3 x less) but have £200 less a month? My dad is 90 and owns his house so should inherit half of this one day (unless needed for care). I plan to sell my hobby related items online later this year so may get income from that. Bearing all that in mind should i take the smaller or larger lump sum. A larger annuity is no good if i dont live a long life, thanks 😊

[PaulrB]

My situation is I have older pensions consolidated in one pot but also have unsecured debt, so was thinking of taking the 25% at 55 to pay off this debt, but I am not touching my workplace pension I have been in for 15 years and plan to stay in for the next 10 years.

[OlaleyeAkintemi]

Thank you for this video. I have been paying Pension for about 12 years but it is only few months ago that I really understand the importance and value of PENSION. Since then I have been doing more research and now I educate people on my YouTube channel about planning for their future. The future is not as far as many people think.
I am just about taking my 25% lump sum from NHS this month when I turn 55 and will be sharing my experience on that journey.

[flatout]

I've seen a few videos similar to this one recently. I don't see a strong reason not to take the 25% tax free cash. Live for today, you'll still have 75% saved within your pension pot.

[andrewkingdon]

Hi Justin, so this video is now getting slightly out of date considering the recent tax changes (unlimited lifetime allowance) and the fact that the 25% tax free is capped at the old rate based on the old Lifetime allowance. So I'm going to throw you a fastball and pose a question. If a person (such as me) has 7 pensions over the years and I fancy taking some tax free cash out of one (but no taxable amount so I can continue paying up to £60k a year) is it sensible to crystallise one pension take 25% of that and none of the taxable amount and continue paying a large amount into the other pension that I'm still paying into. That's sort of recycling and not (legally) and also I can take tax free from other pensions as and when I feel the need. I ask as I'm 55 in almost exactly 6 months time and my brain is working overtime on this puzzle. I'd be interested in your

[Stan]

My advice is take the whole lot and splash out to treat yourself because you don’t know if you will wake up tomorrow 😂😂😂

[milolee]

Great video Justin.
I had a very serious road accident whilst working for Royal mail aged 31..
Due to my injuries, I was compensated and pensioned off two years later.
At 56 can I cash in that pension as financially, things are just getting harder day by day.
Many thanks in advance for the advice.

[silondon]

Great channel just subscribed, would love a video on AVCS and if there worth it to boast your pension

[robertclarke]

With interest rates moving upwards, it'd be interesting to know if this advice is still relevant?

[davidpearson]

My wife is going to take her NHS pension in May she has been offered £11600 per year (index linked )and 77k lump sum or £14460 per year (index linked )and 42k lump sum we have had a long discussion are taking the higher pension and lower lump sum because of inflation and turmoil on the stock exchange

[richardevans]

If you cash it all in, the first 25% is exempt from taxation. After this there's free allowance up to £12, 570 . So, if you have less than this you can take it all, without paying tax . Is this right ? Or is there someone who knows different .

[alangordon]

No leave it till you aren’t paying to any pension.

[rinakaur]

If you have 3 different personnal pensions, all with less than 30k each, are you able to access them at 55? But only 25% of each will be tax free?

[NathanJones-cqdz]

I turn 55 in March 2028. I assume the change to age 57 instead of 55 comes into effect for the 2028/2029 tax year?

[Fidel-tkrq]

Why I may be asked to effectively take my entire pension account if I'm trying to access my pension pot, before my state pension age and stayed employed, to take the tax free cash ? Please advise