What is Pension Commencement Lump Sum (PCLS)?

When you decide to access your pension, including a Self-Invested Personal Pension (SIPP), one of the first things many people think about is taking a tax-free lump sum. In the UK, this is known as a Pension Commencement Lump Sum (PCLS).

What is a PCLS?

A Pension Commencement Lump Sum is the part of your pension savings that you can normally take tax-free when you access your pension benefits. This typically forms up to 25% of the value of the pension funds you are crystallising (i.e., putting into payment). The remaining 75% would be used either to provide taxable income or to purchase an annuity.

How much tax-free cash can I take?

• The basic rule is you can take up to 25% of the funds you are accessing as PCLS.
• Across all your pensions, your total tax-free lump sums are capped by the Lump Sum Allowance (LSA), which is currently set at £268,275 in the 2025/26 tax year in the UK.
• If your pension grows after taking PCLS, you do not get more tax-free cash on those crystallised funds.

Some people have protected lump sum amounts from older pension arrangements, which may allow a higher tax-free percentage. Always check if you have protection.

Do I have to take PCLS?

No, you can choose not to take a tax-free lump sum if you prefer to use your entire pension to provide income (for example, by buying an annuity).

When can I take it?

You usually take PCLS when you first access your pension benefits, such as when you start a drawdown arrangement or buy an annuity. You can also take PCLS in stages if you crystallise pots gradually.