Take some of it as a lump sum

Take cash lump sums where 25% is tax-free and the rest is taxable.

How it works

Each time you take money with this option, 25% is tax-free and the rest is taxable. The money left in your pension stays invested and you can decide how to use it later. This is sometimes called a ‘partial pension encashment’ or ‘uncrystallised funds pension lump sum’.

Benefits

  • Delay your decision
    You can delay your retirement decision and still take money from your pot.
  • Add to your pension
    You can continue to contribute after you’ve taken cash.
  • Tax-free cash spread out
    Each amount you receive will be split 25% tax-free and 75% taxable. You won’t receive all your tax-free cash at once.

Limitations

  • Contribution restrictions
    The amount you can add to all your pensions may be limited.
  • Can’t reverse your decision
    After you decide to take money from your pension this way, you can’t change your mind and reverse the decision.
  • Tax bracket changes
    Because 75% of your amounts are taxable, you could be pushed into a higher tax bracket.

Is it right for you?

This option is good for people who:

  • Need money now, but don’t want to take their full-tax-free amount.
  • Want their pension to remain invested.
  • Are not quite ready to make a decision on their retirement yet.
  • Plan to take money across several tax years.

How much you can take:

  • You can take as many lump sums and as much as you like, until your pension pot is empty.
  • For some pensions, you must take a minimum amount each time you take cash. Check your policy for details.

Things to think about:

  • If you take too much, you could run out of money for later. 
  • This option will limit how much you can contribute to your pension after you take money from it. This limit is called the Money Purchase Annual Allowance.
  • Since the pension you've not taken will remain invested, the value can still go up and down and may fall below the amount you've paid in.

What else should you know?

How your pension is taxed

Each time you take money using this option, 25% will be tax-free and the rest will be taxable. 

So no lump sum you take using this option will be completely tax-free.

Keep in mind, if you take all your savings at once, you may end up in a higher tax bracket for that year.

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 take money from your pension this way, it will trigger a limit on how much you can contribute to your pension. 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

Access your money flexibly

Get 25% tax-free cash and keep the rest invested to use as an income.

Explore flexible access

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