Pension drawdown

Yes – but there are some limits.

Before you retire, you can normally pay up to 100% of your earnings into your pension – or up to £60,000 if you earn more. This is called your annual allowance.

Taking tax free cash doesn’t affect this. But once you take any taxable income from your pension, something called the Money Purchase Annual Allowance kicks in. After this, you can normally pay in a maximum of £10,000 a year.

There are some exceptions – for example, if you’ve only taken money from small pots (less than £10,000).

This will depend on your individual circumstances. Normally 25% of your pension savings can be accessed tax free.

If you’ve stopped working or have an income that's less than the personal allowance (£12,570 for the 2025/26 tax year), you might consider pension drawdown and splitting where your money comes from.

For example, you take an income up to the personal allowance from the taxable (drawdown) pot. Then top this up with money from your 25% tax free cash allowance. You can take as little or as much as you like, and it will be tax free. Once all the tax free cash has been used, you’ll return to being taxed on anything above your personal allowance.

Not all providers may provide this ‘mix’ option, but at Standard life we call this 'tailored drawdown'. If you want to set this up with Standard Life, call us on 0800 634 7477.

Yes – you can use some or all of your pot to buy a guaranteed income later if you want to.

This can be a good option if you don’t want to commit yet, or you’re unsure what your needs may be later in life. Once your annuity is up and running you normally can't change your options.

Most providers have a maximum age for buying a guaranteed income. With Standard Life, it’s 85.

Currently, pensions can normally be passed on to loved ones free of inheritance tax. The exact tax rules are complicated – read our inheritance tax guide to find out more.

From April 2027, the government have announced their intention to include unused pension savings when calculating the value of estates and could be subject to inheritance tax. The full details of how this will work are still to be confirmed.

Important: Make sure you've checked the beneficiaries on your pension plan. We use this information to help decide where your pension should go to when you die, as your Will does not take care of this.

To update your beneficiaries, log in and choose Actions (in our app) or go to Your details (on your customer dashboard).

Generally no – but there are some exceptions.

If you're in serious ill health you may be able to access your pension before age 55. You can find more information on the HMRC website

You may also be able to take your pension early if you have a ‘protected pension age’. This is rare but may apply if, for example, you are a professional sportsperson. The rules vary between pension plans and providers, so check carefully.

Please call us on 0800 634 7477 so we can discuss all of your options.

Call charges will vary.

When you reach 55 (57 from 6 April 2028) you can usually take 25% of your pension pots as one, or multiple, tax free lump sums. You can then set up a flexible drawdown income with the rest of your pension.

Using your tax free cash as part of your flexible income could mean paying less tax overall. At Standard Life we call this 'tailored drawdown'.

You can take further tax free lump sums if you didn't take the full 25%, or if you've paid more into your pension since.

If you're thinking of using your tax free lump sum to make further pension contributions, you need to be aware of the pension recycling rules. The government backed MoneyHelper website explains more.

Tax rules and legislation may change and your own individual circumstances, including where you live in the UK, will have an impact on your tax treatment. Tax will be deducted from your income before it is paid.

If you’re entitled to receive state benefits like Universal Credit or Pension Credit, you could lose your entitlement or be able to claim back less if you start accessing your pension savings. This is because your pension savings will count as a form of income or could be treated as ‘capital’. So do check if you could be impacted by this.

This can change depending on whether you’re over or under Pension Credit age. You can find out more on this from Citizens Advice.

If you're under age 55 and have a terminal illness with a life expectancy of less than 12 months, you may be able to access your pension early and you may pay less tax.

Please call us on 0800 634 7477 so we can discuss all of your options.

Call charges will vary.

Some pension plans have 'protected tax free cash'. This means you may get more than the normal 25% tax free.

Please call us on 0800 634 7477 if you'd like to take money from a pension with protected tax free cash.

Call charges will vary.