Can I take money from my pension but keep working and saving?

MoneyPlus Features Team

Ever since pensions changed back in 2015, one thing many people want to know is: can I take money from my pension pot and still work – and keep paying in?

The answer is yes you can. You might be taking money from your pension to allow you to reduce your work hours or take that holiday of a lifetime, or if you have no plans to give up work yet, the money could be very useful for supporting your children – or grandkids – through school or university.

When and how much you can take from your pension savings will depend on the type you have.

We take a look at the five things you need to consider when you start taking your pension money while you continue to work on and pay in.

1. Starting to take your pension savings – the basics

You can normally dip into your pension savings whenever you want from age 55, although this could change in future, with a quarter (25%) usually tax-free.

So if your pension pot is valued at £100,000, that’s £25,000 tax-free.

You can take your tax-free cash as one lump sum, or in stages if your pension plan allows it.

Do check with your provider as not all company pensions let you do this.

Take more and anything above your tax-free cash is taxable, just like any other income is.

Our tax guides explain more about your options, how pensions are taxed and how to take your money tax efficiently.

If you’re considering taking your money, Want to take money from your pension soon? is a great place to start.

2. Why it can make sense to keep contributing

Paying into your pension can make sense, whatever your age. And if you are in a workplace pension, your employer may contribute too – a valuable benefit not to miss out on.

What’s so good about a pension? explains more.

3. Is there a limit to how much I can contribute?

If you continue to work, you’ll continue to get tax relief on pension saving up to the amount you earn in the tax year. So, if you earn £25,000 that’s the most you can pay into your pension plan and get tax relief.

However, you also have an ‘annual allowance’ which can limit your pension saving tax breaks – regardless of what you earn.

The standard annual allowance is currently the lower of your salary and £40,000, which is good news as it won’t affect most people. This includes contributions from you and your employer.

But if you’ve taken more than just your tax-free cash out of your pension savings and you continue to pay in, this allowance reduces to £4,000. Your pension provider, that you have taken income from, will let you know if this is the case for you.

That’s a big difference to be aware of.

Find out more in our guide to the annual allowance.

4. Another thing to think about

When you start to take money from your pension, there are quite a few things you need to consider carefully. That includes whether you should access a large chunk of your pension money early. Your pension fund may have to last you throughout what could be a long retirement.

The longer you leave your money invested, the more potential it has to grow – although as it is invested, it can go down as well as up in value and you may get back less than was paid in.

5. Get more support and guidance

Our recent article Want to take money from your pension soon? looks at tax, passing your pension money on tax efficiently, how your entitlement to any means-tested benefits could be affected when you access your pot, and more.

To find out about your options, contact your provider or PensionWise, which offers guidance and phone or face-to-face appointments across the UK if you are over 50.

You might want to take advice on something so important. If you don’t have an adviser you can find one local to you at, visit our website for more information about financial advice, or contact 1825, Financial Planning from Standard Life*.

As ever, keep in touch through MoneyPlus too.


*1825 is a trading name for the Standard Life Aberdeen group’s advice business

Tax and legislation may change. The information here is based on our understanding in October 2019 and shouldn’t be taken as financial advice.

Your own circumstances will have an impact on your tax treatment. A pension is an investment, the value can go down as well as up and you could get back less than you paid in.