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Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.

Market volatility has prompted a reader to change their pension access plans
Thursday 17 Mar 2022 Author: Tom Selby

Because of current market volatility and the impact on my pension I am now considering crystallising 50% of my pot and taking my 25% tax-free lump sum instead of crystallising all my pension.

Then at some later date I’ll crystallise the remainder either all at once or in smaller chunks, taking 25% tax-free each time.

Can I take an income from the crystallised portion of my pension pot even when part of the overall pension pot is uncrystallised?


Tom Selby, AJ Bell Head of Retirement Policy says:

‘Crystallising’ means accessing your pension, either for immediate withdrawal or allocating funds that remain invested to provide retirement income as required.

This triggers a test against your available lifetime allowance. The allowance limits the amount you can save tax-free in pensions over your lifetime and is £1,073,100, although some people with lifetime allowance ‘protection’ will enjoy a higher cap.

‘Uncrystallised’ funds are those where you have yet to allocate to provide a retirement income. It is increasingly common for people to partially cry stallise their pension, meaning some of their pot will be crystallised and some uncrystallised.

Finally, savers are entitled to up to 25% of the amount they crystallise tax-free up to their available lifetime allowance.

For example, someone with a £100,000 pension could crystallise £20,000 of this amount, with £5,000 tax-free and £15,000 going into drawdown. The remaining £80,000 would be the uncrystallised portion of the fund.

In terms of the practicalities, you can take an income from your partially crystallised pension – you’ll just need to make sure there’s enough money designated to provide the income you want.

It’s worth noting that when you take taxable income from your crystallised pot for the first time, this will trigger the money purchase annual allowance, reducing the amount you can put into your pension and benefit from tax relief from the standard annual allowance £40,000 to £4,000.

In addition, you will lose the ability to carry forward unused allowances from the past three tax years.

You should also think carefully about why you’re choosing to access your pension. Volatility is part-and-parcel of long-term investing, and decisions about withdrawals should be based on your long-term retirement strategy rather than short-term market movements.

When you come to commencing withdrawals it’s important to consider the sustainability of your retirement income plan. If your investments underperform expectations or you take big withdrawals – or both – you may need to reduce your income to ensure you aren’t at risk of running out of money.

You’ll also need to review your withdrawals regularly – at least once a year – to check your retirement plan remains on track.


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Please note, we only provide information and we do not provide financial advice. If you’re unsure please consult a suitably qualified financial adviser. We cannot comment on individual investment portfolios.

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