Pension Commencement Lump Sum
Let’s make this easier - a Pension Commencement Lump Sum (PCLS) is a complex way of saying “tax free cash”.
When you reach your retirement age, currently 50 but increasing to 55 by 2010, you can take up to 25% of your pension fund as a lump sum. This is tax free. The remaining sum must be used to buy an annuity.
What can you use it for?
Spend it, clear the mortgage, save it or invest it. This cash injection can be a great boost to your retirement lifestyle. The only ‘off-limits’ investment is you cannot put it into another pension plan.
Things to watch for
Taking a lump sum will significantly reduce the value of your pension fund. Make sure you seek some independent specialist advice to see how this will affect your future income.
Annuities - what are they?
Open market option