A combination of tax-free and taxable money from your pension (also known as "take some or all your pension as cash")

With this option, each time you take money from your pension pot, usually 25% will be tax-free and the remainder of that withdrawal will be subject to income tax. This means the amount you take will always be a combination of tax-free and a taxable amount. You can take money out this way as single cash amounts and/or a regular income.


  • You can decide how and when to take your money, in one go or in single amounts.
  • If you take your money in single amounts, you can control how much tax you pay so you can decide the most tax efficient way to take your money.
  • If you take your money in single amounts, you can dip into your pension pot as and when you need to.
  • Any money left in your pension stays invested – benefitting from potential investment growth. You can choose funds that match the amount of risk you’re comfortable with. And you can usually switch funds, though there may be a charge for this.
  • If you decide to take your money in single amounts, you can also leave what’s left in your pot to your loved ones when you die.
  • If you take your money in one go, you will get a lump sum right away, and you can do whatever you like with it.


  • Once any cash has been paid, you can’t change your mind.
  • As 75% of the money you take could be taxed, you could also pay a higher rate of tax on this and any other income.
  • If you choose to take your money out in stages, you can’t take the full 25% tax-free lump sum at the start.
  • You’ll need to keep an eye on any money you keep invested and review the funds you invest in. The value of your investment can go down as well as up so you might get back less than you put in. 
  • If you take more money from the plan than the amount your investment has grown by, the value of your investment will be less that you’ve put in.    
  • You could run out of money before you die. If you leave money invested and it doesn’t perform well, or you take out too much over time you and your loved ones could end up running out of money. You’ll need to manage that carefully.

Do you have a smaller pension pot?

There are slightly different rules for what are called “small pots”. You may have a small pot if its value is less than £10,000. It’s possible to take a small pot as a cash lump sum. The first 25% is paid tax-free. On the remaining 75% you will have to pay tax at 20%, and you will have to claim or pay an difference in tax to HMRC. This will apply to all payments made under these rules.

For personal pensions you can use the small pots rules up to three times. You have no limit on the number of times you can take small pots from company pensions. This is subject to the rules on the scheme. If you take cash lump sums under small pots, this will not affect your Money Purchase Annual Allowance or ‘MPAA’.

Some examples of using this option

Example 1 - Sally

Lady accessing mobile

Sally is 60 and still works part-time. She's not old enough to receive her state pension, but would like to access her pension pot to fund some urgent house repairs and a holiday with her husband to celebrate her 60th birthday. They have decided that £8,500 will cover their costs.

She has £50,000 in her pension pot. There are a number of ways to access the cash in her pension but Sally decides she wants to take the money as a cash lump sum for the holiday;

Sally takes £10,000 as a cash lump sum

25% of this is tax free; £2,500

The remaining 75%  (£7,500) is taxed at the basic rate of 20%; £1,500

Total received by Sally; £8,500

Sally has already used her annual personal allowance and no other income has been taken into consideration. She leaves the remaining £40,000 invested in her pension pot. She'll need to think about any other income she may receive in that tax year and the impact this may have on the tax she may need to pay in the future.    

Scott is 56 and a higher rate tax payer. Scott has £50,000 in one of his pension pots and he would like to cash it in to pay for some urgent repairs to his house. He’s able to do so as he has another pension pot to fund his retirement.

Scott takes 25% tax-free cash as a lump sum; £12,500

The remaining 75% (£37,500) is subject to tax.

Estimated tax payable: £15,000 which leaves £22,500.

Total received by Scott; £12,500 + £22,500 = £35,000

Because he’s taking it all in one go, he has to pay income tax on it. And as a higher rate tax payer and still earning Scott will be taxed at 40% (or 41% if he was a Scottish Rate tax payer). Scott will also need to think about any other income he may receive in that tax year and the impact on the tax he may have to pay in the future.        

Example 2 - Scott

Access Cash option

Working assumptions:

These examples are based on an individuals living in England or Wales with a Personal Allowance of £12,750 for 2022/23. No other income is taken into consideration. When added to other income for the year, the amount of tax to pay could be at a higher rate.

The actual amount you receive and the amount of tax you may need to pay will depend on the option you choose and your individual circumstances.

The growth rates applied in these examples do not include inflation.

If you’re unsure what is the right option for you and your circumstances, we always recommend you speak to a financial adviser.

The above illustrations are not real life examples or recommendations.

Calculators and tools to help you plan 

Pension pot calculator

Our calculator will help you understand how the options could impact your retirement income. You can use it to understand what your pension pots can provide. It will also show you the buying power of your money by taking into account the effects of inflation.

Please read all of our assumptions to understand how we’ve worked out the amounts. 

The results are not a recommendation and not financial advice.

Retirement Income Planner

This planner shows you how taking different amounts of money from your pot can impact how long your money might last. You can input different amounts and see the impact it has.

Income tax calculator

This calculator will provide an estimate of how much Income Tax you may pay, depending on how much money you take from your pension. You can input different amounts in the box that asks for your gross salary and see roughly how much tax you might have to pay.

Emergency Tax Tool

This tool is to show you how much Emergency Tax you might have to pay on withdrawals from your pension pot.                                      

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Important Q&As

Yes, you can - but remember to consider how you will fund your retirement and think also about tax you may pay, and if this might push you into a higher tax bracket.    

Yes, but cashing in your pension to clear debts, buy a holiday, or indulge in a big-ticket item will reduce the money you will have to fund your retirement. Whichever way you take your money, particularly if it’s your main source of income, you’ll need to plan it out carefully so you don’t run out of money and need to rely on other kinds of income.

If you take your entire pension pot as a lump sum, or take ad-hoc lump sums, the amount of pension savings on which you can get tax relief each year is reduced from £40,000 (the ‘annual allowance’) to a lower amount (called the ‘Money Purchase Annual Allowance’ or ‘MPAA’).

In 2022-23 the MPAA is £4,000.

No, you have the flexibility to take out money how and when you need it.  You don’t have to take all of your money at once, and if you take single amounts you can control how much tax you pay by spreading the amount over a number of years.

Yes, but remember interest rates in banks and building societies can be low, and there could be associated charges.  Leaving money in your pension pot may be more tax-efficient and has the potential to grow, though as with all investments, your money could go down as well as up, so you might get back less than you put in.