How much lump sum?
HM Revenue and Customs limits the amount of tax-free lump sum you can take when your pension is paid to you. The maximum lump sum is the lower of:
- 25% of the capital value of your benefits
- 25% of your remaining lifetime allowance.
The standard lifetime allowance is £1,073,100 and 25% of this amount is £268,275. The Government has announced that the standard lifetime allowance will stay at this level until 2025/26. If you have already taken pension benefits from any UK pension scheme, you have used up some of your lifetime allowance. The maximum lump sum you can take is 25% of your remaining lifetime allowance.
If you have a Guaranteed Minimum Pension (GMP) you may not reduce your pension below the level of your GMP. This means that your maximum lump sum may be lower than the limit set by HM Revenue and Customs.
If you have paid Additional Voluntary Contributions (AVCs) you may be able to take some or all of these as tax-free cash when you take your LGPS pension.
Your pension fund will let you know your options when you are taking your pension.
Use the Lump sum calculator to estimate:
- the maximum lump sum you could take
- the reduced pension that you would get with your chosen amount of lump sum.