Can I transfer a crystallised pension?

A crystallised pension might sound terribly glamorous, but it just means you’re reaping the benefits of saving for your retirement by taking some of the money you’ve saved. This can have an effect if you want to transfer your pension. We’ll explain what you’ll need to know. 

This is just a pension pot where you’ve started to access the money that’s been invested either with an annuity, a scheme pension or income drawdown – we’ll explain these later. To crystallise a pension, you normally need to have reached the minimum pension age of 55 (57 from April 2028).

Here are some things to think about. The information here is for defined contribution pensions, where the size of your pension pot depends on the money that's been paid in and how it's been invested.

Tax free lump sum

You can normally take up to 25% of your pension pot tax-free. So, if you have £100,000 in your pension, then from age 55 (57 from 2028) you can take £25,000 of it without paying any UK income tax or Capital Gains Tax. Once you have taken a tax-free lump sum you will have to decide how to take your crystallised pot – see below.

Annuity

You can use your pension pot to purchase an annuity, a guaranteed income for life. Once you have purchased an annuity you will not be able to change your mind.

Scheme pension

Like an annuity, a scheme pension is payable for life and payments must be made at least annually. It can be taken from a defined contribution scheme if the member has been offered an annuity first.

Income drawdown

Instead of an annuity or scheme pension, you can take your tax-free lump sum and then draw money from your pension when it suits you, by keeping the rest invested. The money invested is in a drawdown arrangement.  

Income drawdown takes planning and discipline, as the money in your pot will need to last through your retirement. You may also be able to switch to an annuity later. We explain how income drawdown works in detail here.

Income tax

When you withdraw from your pension beyond your 25% lump sum, you'll have to pay income tax at your personal rate if your total income is more than the standard personal allowance - which is £12,570 for the tax year 2024/2025. This applies to an annuity, a scheme pension and income drawdown.

Allowances

You have a Standard Lump Sum Allowance (LSA) of £268,275 for 2024/2025, this is the maximum you can take tax-free from your pension, even if that’s less than 25%. 

There’s also a Lump Sum and Death Benefit Allowance (LSDBA) of £1,073,100. This is the maximum you can leave tax-free to a beneficiary if you die before 75.

You can find out more about these allowances here. If they affect you, you may want to get financial advice.

Tax benefits are subject to change and depend on individual circumstances.

This is any pension pot that you or your employer are paying into, where you haven't taken any benefits.

A pension in income drawdown must be transferred to another drawdown pension, which must be a new, separate, empty arrangement. It’s the same with an annuity or scheme pension. But all of them will depend on whether your provider will allow a transfer. 

Whether you can transfer your crystallised pension depends on the type of pension you have and your pension provider. 

If you have a defined benefit pension (also called a final salary pension) then once the pension is crystallised, you won’t be able to move it to another provider. You can only make transfers up to a year before the pension starts making payments to you. 

With a defined contribution pension, you can transfer crystallised funds to another pension provider, but they must be transferred on a like-for-like basis - so all the benefits have to be transferred at the same time. 

To transfer your annuity, contact both your current and prospective providers to confirm if they allow transfers. Check for any fees or specific requirements.

No, once your pension is in drawdown or has been converted to an annuity, it's not possible to transfer part of it.

If you’ve already crystallised your pension and want to transfer it, you’ll need to contact your current provider and the new provider to see if they allow transfers for your type of pension – for example, a drawdown to drawdown transfer. 

A better option is to decide on any pension transfers before you crystallise it. 

But first you'll need to check any benefits you may lose and how the charges and investment choices from your new provider stack up against your current pension - as you may not be better off. For some pensions, for example if it has a value of more than £30,000, you’ll have to get financial advice before you transfer. If you don't have a financial adviser already, you can find one at Unbiased - there will be a charge for this advice.

The government also has a free, impartial service called Moneyhelper, which can give you guidance on your pension choices. 

At Aviva you may be able to transfer your uncrystallised pension to an Aviva Self-Invested Personal Pension (SIPP), which gives you control of your investment choices. 

Always remember that the value of your pension can go down as well as up and you could get back less than has been invested.