Taking money from a pension: the tax-free lump sum and your options
Published · 3 min read · Figures checked . UK rules and rates change, so check the official sources below before you act.
Many people can take up to a quarter of a pension pot tax free. This guide explains the £268,275 limit, the main ways to take a pension, how the rest is taxed, and the minimum age rising from 55 to 57 in 2028.
Who this guide is for
This guide is general information for people in the UK who have a private or workplace pension, such as a defined contribution (money purchase) pension, and want to understand how taking money out works. It does not cover the State Pension, which is paid differently, and it is not advice for your own situation.
The figures below apply in the 2026/27 tax year (6 April 2026 to 5 April 2027) and were checked on GOV.UK on 12 October 2026.
The tax-free lump sum
GOV.UK says you can usually take up to 25% of the amount built up in any pension as a tax-free lump sum. The most you can take this way is £268,275. A protected allowance can mean a higher limit for some people, and GOV.UK links to separate guidance on that.
The tax-free lump sum does not use up your Personal Allowance, which is usually £12,570 a year.
The main ways to take a pension
GOV.UK describes these main choices once you reach the age when you can take your pension. Some people use a mix of them.
- Cash: take all or some of the pot as cash, after the tax-free part.
- Annuity: buy a product that pays a guaranteed income for life.
- Drawdown: keep the pot invested and take a flexible income from it, known as flexi-access drawdown.
- Withdrawals: take the whole pot, or smaller cash sums over time.
How the rest is taxed
Money above the tax-free part is treated as income and taxed at your Income Tax rate. GOV.UK gives an example: with a £60,000 pension and £15,000 taken tax free, the remaining £45,000 has tax taken off by the provider before it is paid.
GOV.UK also warns that taking a large amount in one go can push you into a higher rate of Income Tax, and you may owe more tax at the end of the tax year. Scotland has its own Income Tax bands for earnings, so the rate that applies can differ there.
Small pots
GOV.UK says that pensions worth up to £10,000 can usually be taken in one go, with 25% tax free. You can usually take up to 3 such lump sums from personal pensions, and an unlimited number from workplace pensions. If your total private pensions are worth £30,000 or less, you can usually take everything as a lump sum, with 25% tax free, under what is called trivial commutation. Conditions apply about valuation dates and timing.
The minimum age
GOV.UK says you cannot normally take your pension before 55. The government has said the normal minimum pension age will rise from 55 to 57 on 6 April 2028. Some schemes have protected pension ages, and ill health can be treated differently. Your pension provider can say what applies to your scheme.
Getting help
Free, impartial guidance is available from MoneyHelper, including its Pension Wise service for defined contribution pensions. Pension scams are common, so it can be worth checking that any firm contacting you is authorised by the Financial Conduct Authority.
Check before you act
Rules, allowances and tax rates change. It is worth confirming the figures on the official pages linked below before relying on anything here, because taking pension money out can be hard to reverse.
Sources
For information only. See our disclaimer and editorial standards. Spotted an error? Tell us.
