Lump sum payments
Take one or more lump sums
Uncrystallised Funds Pension Lump Sum (known as UFPLS) lets you take money straight from your pension pot whenever you need it, all at once, as a one-off or a series of cash lump sums. It's also possible to take a UFPLS and then use any of the other pension withdrawal options.
Each time you take a payment, usually 25% is tax-free[⁴] and the rest is taxed as income. Your remaining pension stays invested so it has the opportunity to grow[²].
With this option, it’s important to plan ahead. Taking too much too soon could leave you short of income later in retirement. And because anything over your tax-free amount is taxed as income, large withdrawals could push you into a higher tax bracket.
There are no additional fees or hidden charges for accessing lump sum payments with NatWest Cushon.
Capital at risk. The value of your investments can go down, as well as up, and you can get back less than you invested.
There are no additional fees or hidden charges for accessing your pension with NatWest Cushon.
Why might you choose to take one or more lump sums?
- You may want to take your whole pension pot or multiple lump sums to meet other financial goals, like paying off debts to reduce your outgoings.
- You may want the flexibility to take what you want when you want.
- You may want part of your pension savings to remain invested so they have the opportunity to grow[²].
- You may want to make use of your income tax allowances[¹] and leave some tax-free cash in your pension to allow it the opportunity to grow.
What happens to your pension savings?
If you choose to take money straight from your pension pot as a one-off or series of lump sums (known as UFPLS), you’ll get flexible access to your savings while the rest of your pot stays invested[²].
Each time you take a payment, the first 25% is tax-free[⁴], but the rest is taxed as income. Taking a larger lump sum in one go could push you into a higher tax bracket – so it’s worth thinking about how much you take and when. It’s also good to remember that any money you take out and keep as cash could lose value over time due to inflation (think of how much a 10p chocolate bar from your youth costs now).
Example: Lump sum payments
Let’s say you’re 65 and decide to take £10,000 from your pension pot as a one-off lump sum (this is known as a UFPLS). 25% of that amount (£2,500) would be tax-free.
The remaining £7,500 would be added to your income for the tax year and then taxed through NatWest Cushon payroll. If you’re a basic rate taxpayer, you’d normally pay 20% tax on that £7,500 – that’s £1,500 in tax. That means you’d receive £8,500 in total paid into your bank account – made up of your £2,500 tax-free cash and £6,000 after tax from the rest, with the tax already taken care of – just like how most employers handle pay.
We’ll even send you a P60 for your records, showing how much tax you’ve paid.
Just keep in mind – how much tax you pay will depend on your total income for the year, and HMRC might tax your payment using an emergency code at first. If that happens, don’t worry – you can usually claim any overpaid tax back later.
There are no additional fees or hidden charges for accessing your pension with NatWest Cushon.
Access your pension in the Cushon app
If you are over 55 and a NatWest Cushon member you can organise your withdrawal in the Cushon app.
- Open your Cushon app.
- Tap on your NatWest Cushon pension pot.
- Tap 'More actions'.
- Tap 'Access your pension'.
- Tap 'Take a lump sum'.
- Choose desired option.
Where to find help making decisions
Financial guidance: general know-how to help you make your own decisions
Guidance is a great place to start to build your knowledge about pensions and other personal finance topics. It covers need-to-know info and tips that work for most people, but it isn’t tailored to your goals or circumstances.
If you’re comfortable making your own decisions, guidance services give you the chance to ask questions and get answers from knowledgeable experts. You can get a clearer understanding of your choices, but you can’t get a specific recommendation or advice.
You can access MoneyHelper, a free service provided by the government to provide general guidance on your pension options, by visiting the MoneyHelper website or by calling 0800 011 3797.
If you are aged 50 or over, you can also book a free and impartial Pension Wise appointment. This gives you 45-60 minutes of specialist pension guidance to help you understand your options. It can be on the Internet, over the phone or face-to-face and local to you.
Financial advice: specific recommendations from a professional adviser
Professional financial advice is different to financial guidance because it’s specifically tailored to you.
An independent financial adviser can talk you through your options, explain how they fit with your other financial products, and also make a personalised recommendation based on your goals and circumstances.
They can also work with you to set realistic goals, create a personalised financial plan that considers your specific needs, and make sure your savings, taxes and more are working together to your best advantage.
It’s not free though. If you hire a professional financial adviser, you should expect to pay a fee. You can find a list of regulated financial advisers at MoneyHelper.
Watch out for pension scams
You’d be surprised by how convincing and sophisticated scammers can be. Watch out for emails, calls or letters from businesses or strangers who claim to have a great deal for you.
Reject unexpected offers.
Know who you are dealing with.
Check any contact details.
Don’t be rushed or pressured.
Get impartial information.
For more tips and advice visit the ScamSmart website.
Stay in control with the Cushon app
Use the Cushon app to keep your pension close at hand and make it easier to plan the future you’re hoping for.
- Access your pension options.
- Set a target age for accessing your pension.
- Choose beneficiaries to leave your pension to.
- Manage your regular contributions or withdrawals.
- Find and combine[³] old pensions.
- Choose your own investments if you'd like.
We do not charge, but some pensions may charge an exit fee.
Combine your pensions
It could be hard to know what you've got to rely on in retirement if your pension savings are in multiple pots or even lost. Iris tracks down your old pots and combines them into a single pension with NatWest Cushon. Completely free of charge.
Common questions about lump sum payments
A tax-free[⁴] cash lump sum allows you to take up to 25% of your pension savings without paying any tax. You can take this amount all at once or in smaller portions over time. You can access your tax-free cash with our flexible income option. Each time you request a tax-free lump sum, we pay 25% of the amount directly into your bank account, and the remaining 75% is moved into a drawdown pot, where it stays invested and can be withdrawn later (subject to income tax at that point).
A cash lump sum (UFPLS – Uncrystallised Funds Pension Lump Sum) is a different option. This allows you to take a one-off lump sum directly from your pension. With UFPLS, 25% of each payment is tax-free while the remaining 75% is taxed as income in the same payment.
Key difference: With tax-free cash through drawdown, only the tax-free portion is paid to you immediately, and the rest remains invested for future withdrawals and is taxed when you access it. With UFPLS, the entire amount is paid out at once, with only part of it (25%) tax-free and the rest taxed as income straight away.
Things to consider:
If you want to take some of your tax-free cash while leaving the rest of your pension invested for the future, the flexible income (drawdown) option may suit you. This gives you greater control over when and how much taxable income you take next, potentially helping you manage your tax liability over time.
If you prefer to receive a larger lump sum in one go—and don’t mind paying some tax immediately—the UFPLS option lets you access both tax-free and taxable amounts at the same time. This could be useful if you need a bigger payout for a specific expense and are comfortable with the associated tax.
Your choice will depend on whether you prioritise ongoing flexibility.
You can withdraw a tax-free lump sum from your pension through flexible drawdown.
Yes, there are limits that apply to this option. The first 25% of your pension pot will be paid tax-free[⁴]. The remaining 75% will be treated as taxable income.
If the size of your pension pot is greater than £10,000[²] and you take benefits from it while actively paying into another pension scheme, the total amount you can pay in each year will reduce to £10,000[²]. This is known as the money purchase annual allowance.
However, If the size of your pension pot is less than £10,000[²], you can normally take the full amount as cash without triggering the money purchase annual allowance.
Yes, this option provides a high level of flexibility. You can access your pension savings in stages, and manage your income withdrawals to suit your needs.
You can change how you access your pension income in the future too - for example, taking money when you need it, pausing withdrawals if you wish to preserve your pension fund, or choosing to use the remaining value to buy a guaranteed income (an an annuity) at a later date.
If you choose to take your pension pot as a single lump sum, be aware that this could result in a significant income tax charge, which may substantially reduce the amount you receive.
Yes, although the first 25% of your pension pot will be tax-free[⁴], the remaining 75% is treated as taxable income. By taking it all at once, this could push you into a higher tax bracket and cost much more than withdrawing your savings over time.
The tax will be taken from the value of your pot before it is paid to you and you may be charged emergency tax by HMRC. You will need to settle any overpayments or underpayments with HMRC directly.
How you withdraw income from your pension may have tax implications and the most tax-efficient method will depend on your individual circumstances.
Large withdrawals may affect any means tested benefits you are receiving or may be entitled to.
No, if you take all of your pension benefits as cash you will have no guaranteed income. You will need to make your own arrangements to make sure you have enough to support yourself in retirement and have enough income to meet your outgoings.
Yes, the first 25% of your pension pot will be paid to you free from tax[⁴] up to a maximum value of £268,275. The remaining 75% will be treated as taxable income.
If you are under 75, your pot can be paid tax-free to your nominated beneficiary, up to a limit of £1,073,100 (minus any tax-free cash you already took). Lump sum payments over this limit will usually be taxed on the recipient’s tax bracket.
If you are over 75, all lump sums will be taxed based on the recipient’s tax bracket.
At the moment, death benefits and unused pensions are not included as part of your estate for inheritance tax. However, a change announced in the Autumn 2024 Budget means that these could be liable for inheritance tax from April 2027.
Your beneficiary could be your family and loved ones or even a charity. You can tell us what you would like to happen by nominating your beneficiaries in the Cushon app.
Pension expert, Sarah, explains pension transfers.
Other ways you can access your money
1. Allowances, limits and tax bands are set by the Government and subject to annual review. All information provided is based on current legislation and HMRC rules, which are subject to change.
2. Capital at risk. The value of your investments can go down, as well as up, and you can get back less than you invested.
3. You should understand the features and charges of other pensions first and seek professional financial advice if you are not sure. Check with your product provider before transferring as there may be a penalty for leaving their scheme.
4. Some people are allowed to withdraw more than 25% tax-free cash. This is known as Protected Tax-Free Cash. This could apply to you if you have a certificate from HMRC confirming your protection or your pension has scheme-specific tax-free cash attached to it.
5. You can pay in up to 100% of your net relevant earnings per year to your pension up to the limit of £60k p.a. unless you have unused allowances from the previous 3 years to carry forward, in which case your allowance may be higher. To find out more about relevant earnings and annual allowance carry forward, please see visit GOV.UK or speak to a financial adviser.
6. Source: The Office of National Statistics