Access your money flexibly

Get up to 25% tax-free cash, invest the rest and take an income when you need it.

How it works

Take up to 25% of your pension as a tax-free lump sum and invest the rest to use as an income later. You can take income when you need it, or you can buy a guaranteed income for life. This is also called 'flexi-access drawdown', 'flexible drawdown', or just 'drawdown'.

Benefits

  • Flexible
    Take what you need, when you need it.
  • Tax efficiency
    Time your withdrawals to manage tax efficiency.
  • Stay invested
    Your pot might continue to grow.

Limitations

  • Market changes
    Your pot value can go down as well as up. 
  • Contribution restrictions
    After you start taking an income from your pension, it'll trigger a limit on contributions to all your pensions.
  • It might run out
    Your pot may run out if you take too much, too soon.

Is it right for you?

This option is good for people who:

  • Would like to take their tax-free cash and take the rest as an income later, when it’s right for them.
  • Want to take their tax-free cash while leaving the rest invested.
  • Want choice over how the money left in their pension is invested.
  • Plan to take money across several tax years.

They might also be the type of person who:

  • Likes a more flexible approach, taking what they need, when they need it.
  • Are comfortable with the idea of their pot value going down, as well as up.
  • Want to use the rest of their pension for an income, when they need it.

Things to think about:

  • The money left in your pension could grow, but like all investments the value can go down as well as up.
  • Some pensions might need you to have a minimum amount saved to choose this option.
  • You don’t need to take all your tax-free cash in one go. You can leave some for later, or you can choose a different option and take some cash as a lump sum that’s 25% tax-free and the rest is taxable.

What else should you know?

How your pension is taxed

You can take up to 25% of your pension tax-free, then the rest is taxed as income when you take it.

We'll deduct tax using an 'emergency tax code'. This means you might pay more or less tax than you owe, so you'll need to contact HMRC to claim any refund or pay any tax due.

The maximum tax-free amount you can take across all your pensions is £268,275. This is called the Lump Sum Allowance.

Your tax treatment depends on your individual circumstances. Your circumstances and tax rules may change in the future. If you're unsure, please get in touch with HMRC or a tax adviser.

Future pension contributions

If you only take tax-free cash from your pension, it won’t affect your future pension contributions.

But when you take taxable money from your pension, it will trigger a limit on how much you can contribute to all your pensions. This is called the Money Purchase Annual Allowance. 

This means that there would be a tax charge if you contributed more than £10,000 to your pensions in a year. Normally you can contribute up to £60,000 before there’s a tax charge.

What happens when you die

Money left in your pension after you die will be passed on to your chosen beneficiaries.

Right now, there's usually no inheritance tax to pay on pensions. And if you die before age 75, your beneficiaries may be able to withdraw the money tax-free.

But from April 2027, the rules are changing and any money left in your pension when you die may be subject to inheritance tax.

There will be some exceptions, so you should check with HMRC to be sure.

Explore other pension options

Take some of it as a lump sum

Receive a taxable sum where 25% is tax-free.

Explore taking some

Take a guaranteed income

Get tax-free cash and a secure income for life.

Explore guaranteed income

Take all of it at once

Withdraw your full value, 25% tax-free.

Explore taking it all

Leave it for now

Continue to save and make a decision later.

Explore leaving it