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Lump sum withdrawals explained: withdrawing from your pension

Taking lump sums and your 25% tax-free cash from your pension

If your provider allows it, you can make as many lump sum withdrawals from your pension as you like. These might be to pay off your mortgage, pay a child’s house deposit or enjoy a well-earned holiday. Everyone is entitled to 25% of their pension as tax-free cash, and anything in excess of this will be taxed as regular income.

Freedom over how you take your tax-free cash

You are entitled to 25% of your pension as tax-free cash – otherwise known as your pension commencement lump sum. You can take this in one go when you retire, or split it up into several smaller chunks totalling your 25% amount over several years.

Unlimited lump sum withdrawals

Some providers may allow you to take as many lump sums from your pension as you like. You may also see these referred to as uncrystallised fund pension lump sums or UFPLS for short. Any withdrawals in excess of your 25% tax-free amount will be taxed as regular income. Ex-Pensions Minister Steve Webb famously said that you could technically withdraw your whole pension fund in one go to buy a Lamborghini!

You could technically withdraw your whole pension fund in one go to buy a Lamborghini

How much can you afford to withdraw from your pension?

Your pension needs to provide an income for the rest of your life. So if you are considering taking a lump sum, especially in excess of your 25% amount, you should talk to a financial planner first. Our financial planners can show you how much you could take without running out of money.

Speak to an expert about retirement

Talk to our pension and retirement experts to find out more about your options at retirement:

The decision to access your pension is an important one and will affect your income and possibly your standard of living for years to come. Therefore we recommend that before any decision is made you receive regulated financial advice or get free guidance from Money Helper.

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