Accessing your pension: Your questions answered

Feeling confused about how to access your pension? Not sure about tax-free cash? Although everyone’s circumstances are different, when retirement is approaching, many people have similar questions.

During our recent retirement webinars hosted by Standard Life Financial Advice, customers had the chance to ask questions about taking money from their pension. 

If retirement feels like it’s just around the corner, but you’re not quite sure how or when you can access your pension, don’t worry – many people are in the same boat.

In our next two editions, we’ll break down some of the most common questions our attendees asked.

1. What are my options for taking money from my pension?

There are lots of different ways you can access your pension, and it’s important to consider all your options, because the decisions you make can affect what income you’ll have for the rest of your retirement. 

You may be able to take your money as regular income, as lump sums, or a combination of both. How much tax you’ll pay will depend on the option you choose and the right approach for you will depend on your circumstances and plans for retirement. Here’s what attendees asked our experts.

Can I take money gradually?
Yes – you can take money from your pension in stages. Taking all your pension in one go could increase the amount you need to pay in income tax.

What does drawdown mean?
With drawdown, your pension stays invested and you can take money from it as and when you need to. You may be able to take up to 25% of it tax-free, but any taxable withdrawals you make will count towards your income for that tax year. 

What does annuity mean?
An annuity lets you use some or all of your pension savings to buy a guaranteed income. Depending which type you use, the income could be paid for life or for a set period. 

Are drawdown and annuities the only options?
No – you may also be able to take your pension as a series of lump sums. The way tax is applied will depend on the option you choose, so it’s worth understanding the implications before you decide.  

Can I combine different options?
Yes - you may be able to combine different ways of taking money from your pension, such as using some of your savings to buy an annuity while leaving the rest invested in drawdown. The right mix will depend on your circumstances, retirement plans and attitude to risk.

If you’re unsure which option, or combination of options, could be right for you, take a look at the guidance and support available to you.

2. How does tax-free cash work?

You may have heard that you can usually take up to 25% of your pension tax-free, but you may not be sure how or when you can access it. Many of our webinar attendees were also unsure - here’s what they wanted to know.

Can I take tax-free cash in stages?
Yes – you can choose a phased drawdown if you’d like to access your tax-free cash over time, rather than in one go. You may also be able to take a series of lump sums from your pension. In some cases, 25% of each one is tax-free. 

What happens if my pension value changes?
Many people aren’t sure about when the 25% tax-free figure is calculated – the answer depends on the way you choose to take your pension.

In some cases, the tax-free amount is linked to your pension’s value at the point you first access it. In others, it can be calculated when each withdrawal is made.  

Can I take tax-free cash from more than one pension?
If you have more than one defined contribution pension, you can usually take up to 25% tax-free from each one. For most people, the total tax-free amount you can usually take across all your pensions is limited to £268,275, although a higher amount may apply if you have a protected allowance.
 

3. What tax might I pay when I take money from my pension?

Tax and pensions can be a confusing topic. You should plan your withdrawals carefully, as the amount you take out can impact both the amount of tax you’ll pay and the amount you can keep contributing to your pension without a tax charge. 

How are withdrawals taxed?
Any money you take beyond your tax-free lump sum allowance will count towards your income, which, along with any other income you receive in a given year, will be used to calculate the rate of income tax you need to pay. 

That’s not to say that you’ll have to pay tax on all of your income – income tax is applied in tiers, with no tax currently being charged on the first £12,570 you receive each year. Take a look at the government’s income tax page to learn more about how it works – and remember, if you’re in Scotland, different rates apply.

What are the tax implications of taking a lump sum?
Withdrawing a large amount all at once could mean that you’ll need to pay a higher rate of income tax than if you took the same amount over several tax years – depending on the value of the withdrawal.

How can I avoid emergency tax?
Your first pension withdrawal may be subject to emergency tax – a tax rate that’s applied when HMRC isn’t sure of your tax code. Although it’s not always possible to avoid emergency tax, you can make it easier for HMRC to understand the appropriate tax code to apply by updating your pension provider. If you’ve recently left your job, your P45 may show an up-to-date tax code. 

Keep in mind that the amount of emergency tax you’ll pay will be based on the value of your first withdrawal, which could lead to a higher tax bill than you expected. Once HMRC knows your tax code, any overpayments will may be corrected, usually by adjusting the amount of income tax you pay on future withdrawals. Or you may be able to apply to HMRC for a refund.

Can I keep contributing to my pension after I’ve started accessing it?
You can continue contributing to your pension after you have started accessing it. However, depending on how you access your pension, the amount you can contribute tax-efficiently may reduce. Taking only tax-free cash will not usually trigger this reduction, whereas taking taxable income flexibly may do so.

For more information on the Annual Allowance and the Money Purchase Annual Allowance (MPAA), visit the relevant guidance on GOV.UK.

Where to get help

Having questions about accessing your pension is perfectly normal. Planning for retirement can feel overwhelming, but you don’t need to do it alone. Take a look at the guidance and support available to you.

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The information here is based on our understanding in October 2026 and shouldn’t be taken as financial advice.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.

A pension plan is an investment. Its value can go down as well as up and could be worth less than was paid in.