A pension commencement lump sum refers to a lump sum that is withdrawn tax-free, once you crystallise your pension funds. It is paid after you have reached a normal minimum pension age, which is currently 55.
As of 6th April 2023, you’ll be able to take 25% of your pension as a tax-free lump sum on the first £1,073,100. You’ll pay tax on the remaining 75% at your marginal income tax rate.
It is common to withdraw a 25% tax-free lump sum from your pot, and receive the remaining 75% of your pension savings as a flexi-access drawdown or as an annuity.