Do I have to use up the funds in drawdown before taking out a lump sum from the SIPP that is not in drawdown?

30 January 2023

Question by Mark

I have a large valued SIPP, taken the full 25% of LTA tax free and put the balance of the LTA in to drawdown. Can I now take a lump sum from the remainder of my SIPP and pay the 55% tax charge while still withdrawing a pension from my drawdown pot? Or do I have to use up the funds in drawdown before taking out a lump sum from the SIPP that is not in drawdown?


Answered by Daniel Barrett

Dear Mark

You do not have to use up the drawdown (‘crystallised’) pot first. Any funds you take from the drawdown pot will be taxed at your marginal rate of income tax.

If you take further funds from the ‘uncrystallised’ pot, you will get a lifetime allowance (LTA) tax charge at 55% if you take them as a lump sum, or 25% if you take them as an income but then the income will also be taxed at your marginal rate of income tax.

As you can see, the best route to take depends on your personal rate of income tax.

Kind regards,

Daniel Barrett BSc. FPFS
Chartered Financial Planner

Answered by

Daniel Barrett

Financial Planner

I’m a Financial Planner specialising in investments, pensions & retirement planning, and inheritance tax planning. I love working with clients to answer all their important financial questions.