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Taking Tax Free Cash as a Lump Sum

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Chelsea Steinmann
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How to Crystallise a Pension and Take Tax-Free Cash in AdviserGo

This guide explains how to crystallise a pension in AdviserGo and model taking tax-free cash, including how to direct any surplus lump sum into another account using a transfer.

Overview: Which Pension Type Should You Use?

When adding a pension using the Plus (+) button → Pensions, you’ll see multiple pension options. The key difference for tax-free cash modeling is:

Money Purchase Pension

  • Assumes tax-free cash is available (typically 25%), up to the applicable allowance
  • Represents an uncrystallised pension
  • Use this option when tax-free cash is still available and you intend to model crystallisation strategies

Drawdown Pension

  • Assumes the pension has already been crystallised and tax-free cash has already been taken
  • Withdrawals are generally treated as taxable income
  • Use this option when there is no tax-free cash available (or when the pension is already in drawdown in real life)

Rule of thumb:
If tax-free cash is available, enter the pension as Money Purchase and model crystallisation. If tax-free cash is not available, enter it as Drawdown.

Step 1: Create a What-If Scenario

To model taking tax-free cash without changing your base plan, create a What-If scenario:

  1. Click What If
  2. Name the scenario (for example: “Taking Tax-Free Cash as a Lump Sum”)
  3. Create the plan

You are now working in the What-If scenario.

Step 2: Open the Pension and Apply Crystallisation Instructions

  1. From the Dashboard, go to Pensions
  2. Select the client’s pension (in this example, Sarah’s pension)
  3. On the left-hand side, locate Crystallisations
  4. Turn on crystallisation instructions by moving the Crystallisation slider to the right
  5. Set the Timing (for example: Plan Start)
  6. Select Create New Crystallisation
  7. Choose how much to crystallise:
    • In this example, crystallise the full pension pot
  8. Select the instruction to take tax-free cash as a lump sum only
  9. Click Done to save the crystallisation instruction
  10. Click Done again to exit the pension screen

Step 3: Confirm the Tax-Free Cash in the Plan

After saving the crystallisation, you should see a noticeable inflow in Year 1.

To confirm details:

  1. Turn Details on in the chart (if available) to confirm the inflow source is the pension
  2. Open Year View
  3. On the Cash Flow tab, confirm the lump sum is shown as coming from the pension

Next:

  1. Go to the Pensions tab in Year View
  2. Select the client’s pension

You should see:

  • The crystallised amount (full pension pot in this example)
  • The tax-free lump sum created from crystallisation
  • The remaining funds moved into a Drawdown pension account

Step 4: Where Does the Lump Sum Go by Default?

If the tax-free cash is not immediately used for spending, AdviserGo will direct surplus funds to a default cash holding.

To see this:

  1. In Year View, go to Investments
  2. You may see unused lump sum flowing into the client’s default cash account (used to capture surplus money unless other instructions exist)

If you want the lump sum to go somewhere else (for example, an investment account), you can model a Transfer.

Step 5: Transfer the Surplus Lump Sum Into an Investment Account (Optional)

To move unused tax-free cash into an investment account:

  1. Return to the Dashboard
  2. Click the Plus (+) button
  3. Select Transfers
  4. Choose the destination account (for example: GIA — General Investment Account)
  5. Set the transfer source to:
    • All Surplus / All Available Surplus (so it captures the unused lump sum)
  6. Set Recurring to No (one-time transfer)
  7. Set the Timing to the same event/year as the crystallisation (e.g., Plan Start / Year 1)
  8. Click Done

After adding the transfer, the plan will now have explicit instructions for where the surplus goes.

To confirm:

  1. Open Year View
  2. Go to Investments
  3. Verify the lump sum is transferred into the GIA rather than remaining in the default cash account

Step 6: Compare the What-If Scenario to the Base Plan

To see the impact of taking tax-free cash:

  1. Go to Let’s See
  2. Select Compare Plans
  3. Compare the What-If scenario to the base plan

What you may notice:

  • In the base plan, pensions may remain uncrystallised and withdrawals may follow default pension withdrawal logic
  • In the What-If plan, you’ll typically see:
    • A tax-free lump sum at the point of crystallisation
    • Remaining pension funds moved into Drawdown (often shown separately in charts)

Viewing the Impact on Assets and Taxes

Assets Chart

Switch to the Assets chart (and enable the legend if helpful) to confirm:

  • Pension funds moved into a drawdown account
  • Any tax-free cash transferred into an investment account (if you modeled a transfer)

Taxes Chart

Compare the Taxes chart to see how the timing and spread of taxes may change. For example:

  • You may see different tax patterns depending on whether money is drawn from investments earlier vs. pension drawdown later

Next Steps

Once you have created and reviewed the What-If scenario, you can continue using other tools and Insights as normal—now applied to the What-If plan.

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