What is the pension commencement lump sum (PCLS)?
The PCLS is a one off payment that can be made to you when you crystallise your benefits. It is currently tax free, and is commonly referred to as tax free cash.
When is it paid?
Your PCLS is calculated at the time you crystallise your benefits and is normally paid immediately. However, it can be paid up to one year after your crystallisation date if necessary.
How is the PCLS calculated?
The PCLS is normally limited to 25% of the value of your fund being crystallised (or 25% of the Lifetime Allowance if lower).
Who is entitled to more than 25% PCLS?
Certain members of occupational schemes (including SSASs) may have an entitlement to more than 25% PCLS if they have funds which built up prior to the 5th April 2006. We may need to ask for historic employment information which we will need to calculate the PCLS for these people. This entitlement to a higher PCLS may be transferred to other arrangements (including SIPPs), but only through a mechanism known as a ‘block transfer’.