Personal pensions

How you can take your pension

Most personal pensions set an age when you can start taking money from them. It’s not normally before 55. Contact your pension provider if you’re not sure when you can take your pension.

You can take up to 25% of the money built up in your pension as a tax-free lump sum. You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on.

The options you have for taking the rest of your pension pot include:

  • taking all or some of it as cash
  • buying a product that gives give you a guaranteed income (sometimes known as an ‘annuity’) for life
  • investing it to get a regular, adjustable income (sometimes known as ‘flexi-access drawdown’)

Ask your pension provider which options they offer (they may not offer all of them). If you don’t want to take any of their options, you can transfer your pension pot to a different provider.

Taxes and charges

Your pension provider will take off any tax you owe before you get money from your pension pot.

You might have to pay a higher rate of tax if you take large amounts from your pension pot. You could also owe extra tax at the end of the tax year.

Your pension provider might charge you for withdrawing cash from your pension pot - check with them about this.

Get regular payments from an annuity

You might be able to buy an annuity from an insurance company that gives you regular payments for life. You can ask your pension provider to pay for it out of your pension pot.

The amount you get can vary. It depends on how long the insurance company expects you to live and how many years they’ll have to pay you. When they calculate the amount they should take into account:

  • your age and gender
  • the size of your pension pot
  • interest rates
  • your health (sometimes)

There are different kinds of annuities. Some are for a fixed time (for example, payments for 10 years instead of your lifetime) and some continue paying your spouse or partner after you die.

You don’t have to buy your annuity from your pension provider.

Invest the money in a drawdown fund

You may be able to ask your pension provider to invest your pension pot in a flexi-access drawdown fund.

From a flexi-access drawdown fund you can:

Keeping your capped drawdown fund

If you have a ‘capped drawdown’ fund and want to keep it, your money will stay invested.

You can keep withdrawing and paying in. Your pension provider sets a maximum amount you can take out every year. This limit will be reviewed every 3 years until you turn 75, then every year after that.

Withdraw cash from your pension pot

You may be able to take cash directly from your pension pot. You could:

  • withdraw your whole pension pot
  • withdraw smaller cash sums
  • pay in - but you’ll pay tax on contributions over £4,000 a year

When you can’t withdraw cash

You can’t take smaller cash sums if any of the following apply:

  • you’ve already saved £1 million in pension schemes over your lifetime (your lifetime allowance)
  • you have some type of lifetime allowance protection
  • you’re under 75, and the sums you want to withdraw are bigger than the amount of lifetime allowance you have left