Thinking Of Taking Money From Your Pension?

From age 55 (rising to 57 in April 2028) you can normally take up to 25 per cent of your pension as tax-free cash. With drawdown, the rest stays invested and you take income from it as and when you need it.

The appeal is obvious. You keep control, your money stays invested with the potential to grow, and anything left when you die can usually be passed on.

The risk is equally obvious once someone spells it out: your pot is not guaranteed to last. Take too much too early, or hit a bad run of markets in the first few years, and the money runs down faster than you can recover from.

• How much you take. Sustainable withdrawal rates are lower than most people assume. A regulated adviser will model it against your actual pot.
• How it is invested. The investment strategy that built your pot is rarely the right one for drawing from it.
• Tax. Only the first 25 per cent is tax-free. The rest is taxed as income, and a large withdrawal in one tax year can push you into a higher band unnecessarily.
• Emergency tax. First withdrawals are frequently taxed on an emergency code and overpaid. It is reclaimable, but only if you know to reclaim it.

You can take an annuity, use drawdown, take lump sums, or combine them. Many people are better served by a mix. A regulated adviser will tell you which applies to your circumstances – including if the answer is to leave it alone for now.

Normally 55. This rises to 57 in April 2028. Some older schemes have different protected ages.

Usually up to 25 per cent of your pot, subject to an overall limit. Anything above that is taxed as income at your marginal rate.

It can. Unlike an annuity, drawdown carries no guarantee. How long it lasts depends on how much you take, how it is invested, and how markets perform. This is precisely what regulated advice is for.

Yes. But taking taxable income from a pension can trigger the Money Purchase Annual Allowance, which sharply reduces how much you can pay into pensions afterwards. Worth understanding before you draw, not after.

Often yes, though not every scheme offers it and transferring is not always the right move. An adviser will check what your existing scheme allows and whether transferring is in your interest.

Nothing to enquire, and nothing to be introduced. The adviser explains their own charges before you agree to anything.

Pensions Advice UK is a trading name of GAP GNX Limited (Company No. 12013134). We are not authorised or regulated by the Financial Conduct Authority and we do not provide financial advice. We introduce enquiries to FCA-authorised and regulated advice firms. Nothing on this page is a personal recommendation.

The value of investments and the income from them can fall as well as rise and you may get back less than you invested. Taking money from your pension reduces the amount available to provide an income later, and your pension may run out before you do. Tax treatment depends on individual circumstances and may change in future.

Free and impartial guidance on your pension options is available from Pension Wise, a government service from MoneyHelper, for anyone aged 50 or over. You can also seek independent regulated advice.

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