What are crystallised pensions?

What are crystallised pensions?

You may have come across the phrases uncrystallised and crystallised pensions when plannng for your retirement. Whilst these phrases are common in the financial world, they may be a little confusing to the average saver. So what are crystallised pensions.

Here we will explore what a crystallised pension is and what your options are.

In simple terms, a personal pension becomes crystallised at the point you begin to take your retirement benefits. On the other hand, a pension is ‘uncrystallised’ when you are yet to cash in the funds.

Choosing how and when to begin cashing in your retirement fund is an important part of the retirement planning process. Once you turn 55, you can normally crystallise your pension. You will need to decide if a lump Sum, flexi-access drawdown or buying an annuity is right for you. Once you have decided this you can start to take an income from your fund.

Pension Commencement Lump Sum (PCLS)

When you crystallise your pension, you can take a Pension Commencement Lump Sum or PCLS. A PCLS is a lump sum withdrawal of up to 25% of your fund tax-free. The remaining 75% of your fund will be subject to income tax when you withdraw it.

Once you take a PCLS you have 6 months to begin taking the remainder of your fund through drawdown or by buying an annuity. If you choose to drawdown, you can keep your funds invested whilst also giving you access to your money as and when you need it. You can purchase an annuity from a suitable insurance company. The annuity will provide you with a fixed retirement income for either an agreed period or the rest of your life depending on which you choose. Once you have an annuity you will be locked in. However, it is possible to drawdown your pension and then purchase an annuity later.


crystallised pensions


What are the rules surrounding crystallised pensions?

Once you reach age 55 (raising to 57 in 2028) you will be able access your pension. You may choose to do this at 55 or later in life.

Crystallising your pension fund affects the flexibility of your pension planning.  HMRC does not allow the partial transfer of crystallised pension funds. That would count as an “Unauthorised payment and subject to 55% tax charge.

Also, after crystallising your pension fund, you will be limited to the amount you can continue to contribute. This is currently set at £4,000 a year.


In most circumstances, crystallising your pension can take place once you turn 55. You will then need to decide how you would like to access your pension. Your pension is likely to be one of the largest sources of capital you have in your lifetime, therefore you should consider all your options when planning for your retirement.

For impartial information on your pension options, visit MoneyHelper, the UK government’s free pension information service.




The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.

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