D. Withdraw multiple lump sums
It’s possible to spread out withdrawals from pension savings over a number of years rather than take it all in one go. Although our pension policies don’t offer this option. It does mean that the rest of your pension savings continue to benefit from tax-friendly investment. There are tax advantages too because in any tax year, the level of income is more likely to stay within a lower rate of tax.
For those wishing to use some of their tax-free lump sum to provide income, do give some thought to where you put your money while it’s giving you an income. For example, if you choose an investment fund, what level of risk are you prepared to take? Is the level of risk appropriate? What are the charges?
The tax treatment of multiple lump sum withdrawals works in the same way as taking pensions savings in one go. A quarter of the cash is tax-free and the rest will be taxed. But don’t forget that any cash lump sums will be treated as ‘income’ by the HMRC and will also include any State Pension payments too. The amount of State Pension you'll receive will depend on your National Insurance payment record. To find out more about your State Pension, visit the Government's dedicated website.