Taking tax free cash from your pension

You can normally take 25% of your pension tax free, up to a limit of £268,275 for the 2025/26 tax year.

A few pension plans have protected tax free cash, which may mean you can take more than this. Check your annual statement or contact your provider if you’re not sure.

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.

Yes, income from pensions is normally subject to income tax.

This means you’ll pay tax based on your total earnings, which normally includes pension withdrawals, state pension, and income from work.

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.

There’s no right answer to this question – it depends on your circumstances.

Taking tax free cash gives you immediate access to your money, so you can use it however you like.

Any money you keep as cash may lose value over time due to inflation, whereas money in your pension plan is normally invested. This means it has the potential to grow over time, although this isn’t guaranteed.

Remember it’s not ‘all or nothing’. You can take a number of smaller tax free lump sums over time.

You can also use tax free cash as part of a flexible retirement income, which will normally mean paying less tax overall. Not all providers offer this. At Standard Life we call this 'tailored drawdown' – you can call us on 0800 634 7477 to set it up.

Call charges will vary.

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.

You can normally take tax free cash from age 55 (or 57 from 6 April 2028).

Some people have a protected pension age, but this is rare. Check your annual statement or contact your provider if you're not sure.

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.