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If you have over £10,000 in your pot, you may be able to take flexible lump sums from your pension savings with us. HM Revenue & Customs (HMRC) calls these ‘uncrystallised funds pension lump sums’ or ‘UFPLS’.
HMRC imposes restrictions on the payment of flexible lump sums, so it may not be possible for us to pay these to you in all cases. In particular, HMRC requires that you must have lifetime allowance available. See the Your options at retirement booklet for more about the lifetime allowance.
At the moment we don’t charge you to access your savings in this way, but this may change in the future.
If you have savings in The TUTMAN B&CE Contracted Out Pension Scheme or the LSRB Additional Voluntary Contributions (AVCs) or EasyBuild S2P, you can transfer your pot(s) into an existing account in The People’s Pension or an existing or new EasyBuild Stakeholder Pension policy so that you can take advantage of flexible lump sums.
The first 25% of each flexible lump sum you take is tax-free and the remaining 75% of each amount is taxable, as if it was income, at the highest rate you pay. You receive tax relief on your pension savings up to the annual allowance (more on this below), but you’ll pay tax on your pension income. Note that you get a standard personal allowance (currently £11,850 in the 2018-2019 tax year) of tax-free income each year.
The flexible lump sum you receive from B&CE is likely to be quite a lot lower than the amount you take out of your pension savings. This is because:
Say you take £30,000 as a flexible lump sum but you’re on an emergency rate of tax.
£22,500 is taxable, meaning you pay £8,479.95 in tax.
So you’d get £21,520.05.
You need to be aware that taking a flexible lump sum could take you into a higher tax band and land you with a large tax bill if:
It may be more tax efficient to take a series of flexible lump sums across different tax years – Pension Wise can offer guidance on your options.
Consider your personal tax circumstances and be clear about how much tax you’ll pay on any money you’re planning to take as a flexible lump sum.
There is a limit to the amount of money you can save into your pension across all of the schemes you belong to and receive tax relief on. This is known as your annual allowance.
The standard annual allowance is £40,000 (2018-2019 tax year).
If you take a flexible lump sum, your annual allowance for any future savings into a defined contribution pension (like The People’s Pension or EasyBuild) will be reduced to £4,000 in the current and any future tax year.
This is called the ‘money purchase annual allowance’.
Payments over this amount will incur an annual allowance charge. This may affect how you build your pension pot back up if you continue saving into your pension.
You’ll find more details in the Your options at retirement booklet on the next page about getting ready to take your money.