If you have a small pension pot under a personal pension plan (like an existing Retiready Pension) and meet certain conditions, you’re able to take the pension fund as a lump sum. Normally 25% of this can be tax free. The main conditions are:

• You must be at least 55 years old  (increasing to age 57 on 6 April 2028). You may be able to take a lump sum before age 55 if you have a protected low pension age or meet the ill-health condition.
• The full value of your pension arrangement must be taken and this must be worth no more than £10,000.
• You can only exercise the small pot lump sum option from a personal pension three times in your lifetime.

Small pot lump sums don't affect your annual allowance.

If benefits under your plan are not already in payment, 25% of the small pot lump sum is paid tax free. The remainder is added to the rest of your taxable income in the tax year in which you take it when determining any income tax liability.

If benefits are in payment, the lump sum value of your pension will be added to the rest of your taxable income in the tax year in which you take it when determining any income tax liability.

A Retiready Pension can have only one arrangement. If your Retiready Pension was worth more than £10,000, you wouldn’t be able to use the small pots option to take the benefits as a lump sum.

You may be able to take a small pots lump sum before age 55 if you have a protected low pension age or meet the ill-health condition. Find out more at Your Retirement Planner.

This information is based on our understanding of current taxation law and HM Revenue & Customs practice which may change.

Transferring or consolidating a pension may not be the best option for you. You may lose features, protections, guarantees or other benefits - so make sure you compare products before transferring or consolidating. It’s up to you to decide if this is the right decision for you. If you’re not sure, speak to a financial adviser - there may be a charge for this.