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Proportional structure

The Scottish Widows Personal Pension account uses a proportional structure with a notional split of uncrystallised and crystallised money. This means that we don’t require your clients to split their Personal Pension into drawdown and non-drawdown pots, also known as crystallised and uncrystallised accounts. Instead, all assets in the Personal Pension (shares, funds, cash, etc.) are held within a single account, with a notional split of uncrystallised vs crystallised money. This means clients can sell any asset to fund a withdrawal, such as a tax-free lump sum or regular income payment, without being restricted to a specific pot. This should mean it’s easier to sell down assets and manage cash, resulting in less failed income payments.

Notional Splits

If the Personal Pension is partially crystallised, meaning the client holds both crystallised and uncrystallised money, the Personal Pension value will be notionally split into two components, uncrystallised and crystallised, we assign a value to each side of the split without assigning specific assets.

For example client A has a Personal Pension worth £200k. They have never taken any tax-free cash, so their split is 100% uncrystallised. If they decide to take a PCLS payment of £10k, they take this from the money currently held in cash. This results in a total Pension value of £190k, with £160k being left uncrystallised and £30k crystallised, the notional split is 84% uncrystallised and 16% crystallised.

How Does a Notional Split Work?

  • Investment Growth/Decrease: Any investment growth or decrease is split proportionately across the uncrystallised and crystallised split.
  • Contributions: Added to the uncrystallised split.
  • Withdrawals: Most withdrawals, such as Pension Commencement Lump Sums (PCLS) or income payments, are deducted from the crystallised split. An Uncrystallised Funds Pension Lump Sum (UFPLS) withdrawal is taken from the uncrystallised split.
  • Transfers: Any transfers into the Personal Pension from another provider are allocated to the relevant part of the Personal Pension based on the status at the previous provider.

Every time funds are added to or withdrawn from the Personal Pension, we recalculate the split between uncrystallised and crystallised to ensure accuracy.

Where is the notional split displayed?

You can check the notional split on a client’s pension on the “Portfolio Report” within the customer dashboard. This displays both value and percentage of “accumulation” (uncrystallised) and “flexi-access drawdown” (crystallised).

Examples of notional split in practice

Examples of notional
split in practice

Ross’s example

Ross has £800,000 in his Personal Pension, he has not crystallised, so his account is 100% uncrystallised.

He wants to take PCLS of £100,000, he will sell investments of his choice to generate cash for the payment.

  • £400,000 is crystallised, with £100,000 paid out to Ross.
  • £300,000 is designated as crystallised split (43%) and £400,000 uncrystallised (57%).

This split remains constant as his investments, and the total value of the pension account, rises or falls in the market.

This can also be illustrated by looking at how his pension is invested, remember that the assets are split across uncrystallised and crystallised based on the notional split, the split only changes when money is paid in or out and growth (or fall) in value of assets is reflected proportionally across uncrystallised and crystallised proportion.

Dawn’s example

Dawn transfers her £600,000 pension to Scottish Widows, with £240,000 in uncrystallised (40%) and £360,000 in crystallised (60%).

She takes a £40,000 taxable income payment from her crystallised split, selling investments of her choice.

  • Her Personal Pension is now worth £560,000, split £240,000 (43%) uncrystallised and £320,000 (57%) crystallised.

From the £560,000 pension she now decides to take £20,000 tax-free cash,

  • her uncrystallised split is reduced by £80,000 to £160,000
  • £20,000 is paid out to Dawn
  • Her crystallised split increases by £60,000 to £380,000
  • Her Pension is now worth £540,000, split 30% (£160,000) uncrystallised and 70% (£380,000) crystallised.

Jonathan’s example

Jonathan has a £180,000 Personal Pension that has all been crystallised and is invested in a selection of investments.

He contributes £20,000 which is added to his uncrystallised split, this results in his split moving from 100% crystallised to 10% uncrystallised and 90% crystallised.

The new contribution is to be held in cash rather than invested, this cash is not ringfenced to uncrystallised, it’s part of his overall Pension balance.

This means that if the value of the investments in the account change, but the cash balance remains at £20,000, then the cash balance will no longer be exactly the same as the uncrystallised split, which will have an impact on how much can be taken as a Pension Commencement Lump Sum (PCLS) payment, when he chooses to take his remaining tax-free cash and move his remaining uncrystallised money into crystallised.

When Jonathan decides to request his remaining tax-free cash, his Pension is still worth £200,000 and split 10% uncrystallised / 90% crystallised.

As he has £20,000 in uncrystallised split his tax free PCLS payment will be £5,000, and £15,000 will be added to his crystallised split. After withdrawing his PCLS his pension would be 100% crystallised.

If, however, he waited to request his tax-free cash and;

  • His investments grow and his pension is now worth £220,000; the amount he could take as a tax free PCLS payment would go up. The 10% uncrystallised split would be worth £22,000, with tax free PCLS of £5,500.
  • Alternatively, if the overall balance dropped 10% to £180,000; the uncrystallised split would be 10% of £180,000 equal to £18,000, with PCLS available of £4,500.

Note: All examples assume that the client has sufficient remaining Lump Sum Allowance.

FAQs

When a contribution is received into a Personal Pension, the funds are automatically added to the uncrystallised split. Each time a contribution is received we recalculate the split between crystallised and uncrystallised.

  • Regular and one-off income payments: Taken from the crystallised split.
  • Uncrystallised Funds Pension Lump Sums (UFPLS): Taken from the uncrystallised split.

When money is crystallised, it is transferred from the uncrystallised split to the crystallised split. At this time a Pension Commencement Lump Sum (PCLS) can be taken from the money that moved, and we recalculate the notional split between uncrystallised and crystallised.

No, assets are not allocated to the uncrystallised or crystallised split, so your client can sell any assets for a withdrawal.

No. Assets, including cash, are not allocated to the uncrystallised or crystallised split. If you are making a withdrawal, you simply need to ensure that there is enough cash in the Personal Pension Account, you don’t need to worry about which “pot” it is in.

We will coordinate with the previous provider to determine how much of the transferred pension is crystallised how much is not. We will then ensure the value is correctly split in your clients Scottish Widows Personal Pension.

We will inform the new provider about the crystallised and non-crystallised split of the transferred funds. If any value remains with us, we will ensure that it is correctly split between uncrystallised and crystallised within the Personal Pension.

You can check the notional split on the “Portfolio Report” within the customer dashboard. This displays both value and percentage of “accumulation” (uncrystallised) and “flexi-access drawdown” (crystallised).

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