1. What is a Pension Lump Sum Calculator?

Definition: This calculator determines the tax-free lump sum you can take from your pension pot (up to 25% of the total value).

Purpose: Helps individuals planning retirement understand how much they can withdraw tax-free from their pension savings.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Lump Sum — Tax-free amount you can withdraw ($)
• Pot Value — Total value of your pension savings ($)

Explanation: You're typically allowed to take up to 25% of your pension pot as a tax-free lump sum when you access your pension.

3. Importance of Lump Sum Calculation

Details: Knowing your tax-free lump sum helps with retirement planning, budgeting, and understanding your available funds.

4. Using the Calculator

Tips: Enter your total pension pot value in dollars. The calculator will show your maximum tax-free lump sum amount.

5. Frequently Asked Questions (FAQ)

Q1: Is the lump sum always 25%?
A: Typically yes for defined contribution pensions, but rules may vary for defined benefit schemes or special circumstances.

Q2: Is the remaining 75% taxed?
A: The remaining amount is subject to income tax when withdrawn, unless taken as further tax-free cash through specific arrangements.

Q3: Can I take more than 25% tax-free?
A: Generally no, but there are exceptions for small pots or certain protected rights.

Q4: Does this affect my annual allowance?
A: Taking a lump sum may affect your money purchase annual allowance (MPAA) for future contributions.

Q5: When can I take my lump sum?
A: Usually from age 55 (rising to 57 in 2028), but check your specific pension scheme rules.