Taking cash from your USS Investment Builder pot

We know that it’s important for you to have options when it comes to accessing your retirement savings. That’s why we’ve expanded our defined contribution (DC) offering to include cash payments.

What are cash payments in USS?

Cash payments, otherwise known as Uncrystallised Funds Pension Lump Sums (UFPLS), are a flexible way of taking money from your USS Investment Builder pot.

You can take up to four cash payments from your pot each calendar year and leave the rest invested. This means you can access your savings before you retire, and you don’t have to take them at the same time you take your USS Retirement Income Builder benefits or transfer out of USS to access them.

You can then continue to pay into your pot whilst you’re an active USS member, but not yet retired. So your savings could continue to grow*.

When can you take them?

•    You can take cash payments anytime from age 55, before or after you retire.

•    If you’re under age 75, you must have enough lifetime allowance left to cover the whole of your cash payment. More eligibility criteria can be found in our factsheet.

What are the advantages?

•    You can choose how much you want to take from your USS Investment Builder pot and when you want to take it (note that minimum amounts apply).

•    Each time you take a payment, 25% is usually tax free and the rest is taxed accordingly as income.

•    We cover the cost of your first cash payment in a calendar year. An admin charge of £90 is taken for the second, third and fourth cash payments you take during the same calendar year.

•    There’s no charge if you take all of your pot in one go.

What are the tax implications?

•    Taking cash payments will trigger the money purchase annual allowance (MPAA), which limits the amount both you and/or your employer can save into any DC scheme each year before paying tax. The MPAA is currently £4,000 and once you’ve taken a cash payment, from USS or any other DC scheme, the limit will apply for life.

•    You may also slip into a higher tax band, depending on any other income you receive and the size of the cash payment you take.

•    You’ll initially pay emergency tax on the cash you take, which may need to be corrected through self-assessment.

Examples:

A member has a USS Investment Builder pot of £12,000 and wants to take the whole amount as a cash payment:

Amount requested: £12,000
Tax-free cash (25%): £3,000
Cash subject to tax: £9,000
Emergency tax payable on £9,000: £2,630
Total payment received after tax: £3,000 + (£9,000 - £2,630) = £9,370

What about the MPAA?

A member aged 57 has taken a cash payment and is subject to the MPAA. Their salary is £82,000, so they’re over the salary threshold and paying into the USS Investment Builder.

Their total member and employer contributions to the USS Investment Builder each year will be around £5,000.

They will have exceeded their MPAA by £1,000, so a tax charge is due. Unused allowance from previous years cannot be used to cover this charge.

Unless the member’s salary falls, or they apply a voluntary salary cap, the member is likely to breach the MPAA every year up to retirement, and will need to pay a tax charge each year.

Please note: these examples are based on 2018/19 tax rates.

How to apply

You can read our factsheet about the various ways to take your DC savings, and our factsheet on cash payments, which provides more information on tax implications, eligibility and other considerations.

If, after reading these, you think a cash payment is right for you, you can download our application form.

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You must think carefully before taking cash payments – the tax implications could have a huge effect on your future DC savings. Make sure you read our factsheet for all of the information. You should also seek financial advice if you aren’t sure whether this is right for you.

*Future investments can go up as well as down.

For a glossary of our terms please see more information on our important terms page.

Published date: 16 January 2019

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You can now treat your USS Investment Builder pot a little like a bank account and access your savings as and when you need them, anytime from age 55.