Can You Withdraw From Your Pension?

You can withdraw from your pension once you reach the minimum pension access age, which is currently 55. This will rise to 57 from 2028.

At that stage, most people can take up to 25% of their pension pot tax-free, with the rest treated as taxable income.

Your State Pension is handled separately and cannot be accessed early. The State Pension age is currently 66, rising to 67 and eventually 68 over the coming years.

How and when you access your private pension will depend on your personal goals and financial circumstances.

There’s more choice than ever when it comes to approaching retirement options.

If you’re looking for flexibility, security or a mix of both, it’s important to take your time, compare your options and make sure the decisions you make now will support your future lifestyle.

Withdrawing Early

In most cases, pensions are locked until you reach the minimum age. The main exceptions are terminal illness or if your scheme has a protected early retirement age, which is rare and usually tied to older plans.

If you access your pension before you’re legally entitled to, it may be classed as an unauthorised payment. This can lead to a tax charge of up to 55% from HMRC.

Be cautious around schemes that promise early access. Many are scams and could result in the loss of your savings, plus heavy tax penalties.

If you’re unsure whether you might qualify for early access on health grounds or through your scheme rules, our pension advisors can talk you through your options and help you stay on the right side of HMRC.

Can You Withdraw From Your Pension While Still Working?

Yes, you can begin taking money from your pension while continuing to work, provided you’re over the minimum pension age.

This is quite common for people who reduce their hours but still want to top up their income. It can help ease the transition into retirement and allow for greater flexibility with budgeting.

It’s worth noting that pension withdrawals count as income. If you’re still earning from employment, drawing too much from your pension could push you into a higher tax band.

If you’re thinking of taking this route, getting tailored pension advice could help you avoid unexpected tax bills and ensure your income remains steady for the years ahead.

Our advisors can help assess whether phased withdrawals, lump sums or other at retirement options would suit your situation best.

How Much Should You Withdraw?

There’s no simple rule for how much to take from your pension. The right amount will depend on your lifestyle, income needs, health and whether you have other sources of savings.

Withdraw too much too soon and you could run short later on. Take too little and you might not get the most from your retirement years.

The key is finding the right balance. Our pension advisors are here to help you work out a withdrawal strategy that keeps your finances sustainable while allowing you to enjoy the retirement you’ve planned for.

What Happens if You Take Your Whole Pension Pot?

It is possible to take your entire pension pot as a lump sum, but it’s important to fully understand the financial implications before doing so.

The first 25% is usually tax-free, but the remaining 75% is added to your income for that tax year and taxed accordingly.

This could push you into a higher tax bracket, especially if you’re still working or have other income streams. In some cases, the resulting tax bill can be significantly higher than expected.

Taking the whole pot at once also means your money is no longer sheltered within the pension environment, which offers certain tax advantages.

Once withdrawn, those funds could affect your entitlement to means-tested benefits, and you may lose the potential for further tax-free growth.

While it may be tempting to access a large sum in one go, it’s often worth considering whether smaller, more controlled withdrawals would provide better long-term value. It’s not just about accessing the money, but making sure it lasts throughout retirement.

If you’re thinking about taking your full pension, our pension advisors can help you explore the short-term and long-term consequences and look at whether alternative withdrawal strategies might better suit your plans.

This website/blog/script/guide is for information purposes and does not constitute financial advice, which should be based on your individual circumstances.

The value of pensions and any income from them can fall as well as rise. You may not get back the full amount invested.