In our last Wealth post, we examined what crystallising your pension means. In this post, we explore the various methods of crystallisation – the how. There’s more than one way to crystallise a pension, and your choice of strategy can affect your tax, income, and estate planning for years. NMTVP breaks down the main crystallisation strategies people use in the UK

 Crystallisation strategies

1. Full crystallisation at once

• How it works: You crystallise your entire pot in one go. Typically, you take 25% as a Pension Commencement Lump Sum (PCLS) tax-free, and the rest goes into drawdown or an annuity
• Pros:
  • Access a large tax-free lump sum immediately
  • Simple to manage
  • Clear estate planning (what’s crystallised vs uncrystallised)
• Cons:
  • Could create a big tax bill if you take income too soon
  • Reduces future tax-free cash growth (because future growth is now on crystallised funds)
  • May trigger the Money Purchase Annual Allowance (MPAA) if you start withdrawals. This means a reduction from £60,000 to £10,000 a year in pension contributions

2. Partial / Phased crystallisation

• How it works: You crystallise portions of your pot over time, taking 25% of each portion tax-free and leaving the rest invested in drawdown.
• Pros:
  • Tax efficiency — you only crystallise what you need, spreading tax-free cash and taxable income over multiple years
  • Helps manage income tax bands
  • Keeps some funds uncrystallised, allowing more future tax-free lump sums
• Cons:
  • More administration
  • Market risk on uncrystallised funds and funds in remaining in drawdown

3. UFPLS (Uncrystallised Funds Pension Lump Sum)

• How it works: Instead of drawdown, you take lump sums directly from uncrystallised funds. Each withdrawal: 25% tax-free, 75% taxed as income
• Pros:
  • Simple — no need to move into a separate drawdown account
  • Flexibility to “dip in” as needed
• Cons:
  • Each withdrawal is partly taxable, so less control than phased crystallisation
  • Can trigger the MPAA
  • May run out faster without investment growth

4. Tax-free Cash Only (No Income Yet)

• How it works: Crystallise part or all of your pot just to take the 25% lump sum, but leave the taxable portion invested in drawdown. You don’t actually draw income yet
• Pros:
  • Access cash without immediately paying income tax
  • Keeps taxable funds invested for later
• Cons:
  • Growth is now on crystallised funds (no new tax-free cash generated)
  • May still affect Lifetime Allowance tests if relevant (though the LTA is being replaced with lump sum allowances)

5. Staged Annuity Purchase

• How it works: You crystallise parts of your pot over time to buy annuities in stages
• Pros:
  • Hedge against poor timing — you can buy annuities when rates are better
  • Provides guaranteed income
• Cons:
  • Irreversible
  • Less flexibility than drawdown

6. Blend of Drawdown + UFPLS + Annuity

• How it works: Many retirees mix strategies. For example, take phased crystallisation to manage tax-free cash, use UFPLS for ad hoc needs, and later buy an annuity for guaranteed income
• Pros:
  • Tailored to income needs and tax planning
  • Balances flexibility with security
• Cons:
  • More complex
  • Requires ongoing review

 Example (simplified, £100k pot)

• Full crystallisation: £25k tax-free lump sum, £75k to drawdown/annuity.
• Phased crystallisation (25% now): £25k crystallised → £6.25k tax-free, £18.75k to drawdown. Remaining £75k uncrystallised, so more tax-free cash available later.
• UFPLS (£10k withdrawal): £2.5k tax-free, £7.5k taxed as income.

In practice, most people don’t stick rigidly to one — they phase crystallisation to control tax and inheritance planning, then may annuitise part of the pot later for secure income