If your pension savings are small

Defined contribution scheme

Under rules from April 2015, if you have a defined contribution scheme, you are able to access all your pension savings from the age of 55.

Defined benefit scheme

You may be able to take the whole amount of any benefits from a defined benefit scheme as a cash lump sum. This depends on your age and the value of your pension.

You may prefer to do this if you think getting a lump sum would be more useful than getting the money gradually through a regular income. For example, some people choose to invest the lump sum, or use it to pay off their debts.

If you currently pay tax at the basic rate of 20%, a large lump sum from your pension may push you into the higher tax band of 40% (or even 45%). It’s important to take financial advice.

Deciding whether to take your pension savings as a regular income or one or more lump sums may affect the means-tested benefits you get both now and in the future.

If the value of your defined benefit pension is no more than £10,000

You may be able to take all your defined benefit pension benefits as a lump sum if:

  • you are aged at least 55 (or earlier, if you have ill health)
  • the value of your defined benefits is no more than £10,000.

This is known as a Small Pot.

25% of the value of your benefit is tax-free. The remaining value will be taxed as income in the tax year in which you take it.

If the total value of all your pension benefits is no more than £30,000

You may be able to take all your pension benefits as a lump sum if:

  • you are aged at least 55 (or earlier, if you have ill health)
  • the total value of your defined benefits plus the value of any other workplace or personal pension scheme benefits you have is no more than £30,000.

This is known as Trivial Commutation.

25% of the value of your benefit is tax-free. The remaining value will be taxed as income in the tax year in which you take it.

Back to Pensions

Understanding pensions

There are many different pension schemes available, including the State Pension paid by the government.

Pension changes

Since April 2015, some types of pension have become more flexible.

State pensions

The State Pension is a regular payment you can get from the government when you reach retirement age.

Workplace pensions

A workplace pension is a pension scheme arranged through your employer. There are different types of workplace pensions.

Personal pensions

Personal pensions are often available through your workplace. But self-employed people often have them too.

Defined benefit schemes

A defined benefit scheme is when your employer promises to give you a pension when you retire.