Tax-free money from your pension (also known as "Flexible Cash and Income or drawdown")

With this option, you can take some or all of your 25% tax-free cash first. What’s left in your pension pot remains invested, giving it a chance to grow, however, as with all investments, your money can go down as well as up.

After you’ve taken all of your tax-free cash, any money you take out will be subject to tax. This means that you can take money from your tax-free amount first and then take the taxable amount when you need it. Remember, you don’t have to take all of your tax-free cash in one go.

To help you minimise the tax you pay, you can take the taxable money whenever you like. So, for example, you can take it over a number of different tax years. This spreads it out, and if you do it this way it could help keep you in a lower tax bracket.


  • You have the flexibility to take your money out as and when you need it.
  • You can manage your money in a tax efficient way, over a number of years.
  • 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.
  • You’ll have the option to choose your investment funds, so your money could carry on growing.


  • You and your loved ones could run out of money before you die. If you leave money invested and it doesn't perform well, or if you take out too much money over time, you could end up running out of money. You'll need to manage that carefully.
  • It isn’t guaranteed to grow. You’ll need to keep an eye on any money that remains invested now and in the future. If the funds you’ve chosen do badly, your pension pot could drop in value – so you may get back less than you put in.
  • Anything you take out above 25% tax-free cash would be subject to tax and could push you into a higher tax bracket.

Some examples of using this option

Steve is 60 and has decided he wants to work part-time. He wants to access some of his pension savings to pay off some debt and pay for some urgent house repairs. His current pension pot is £150,000 and he has worked out that by taking his 25% tax-free cash he can take £37,500.    

Steve takes his full 25% tax-free cash as a lump sum;  £37,500

He leaves the rest invested in drawdown; £112,500

If left untouched until age of 65, his pension pot could be worth around; £130,400

If left untouched until the age of 70, his pension pot could be worth around; £151,190

Steve receives the £37,500 he needs. Steve is able to access the remainder of his pension pot at any time, but any money taken will be subject to income tax. Leaving his money invested means there is an opportunity for growth, but like all investments, he could end up with less than he started with.

Of course, Steve didn’t need to take his full tax-free cash in one go and instead could have taken a small amount of tax-free cash and taken the rest later.    

Gillian is 60 and is retiring with a pension pot of £50,000. She wants to start taking regular income from her pension savings and wants to take her full 25% tax-free cash up front to pay for some new windows for her house. Gillian doesn’t qualify for state pension so this will be her only source of income.

Gillian takes 25% tax-free cash at the start; £12,500

And then takes the same taxable amount each year; £2,400

So her pension pot could last for; 21 years and 1 month if she continues to take £2,400 each year    

Gillian receives her full tax-free cash amount of £12,500 and leaves the remaining £37,500 invested. She has set-up an annual withdrawal amount of £2,400 which is taxable. Gillian can decide to change the amount of money or stop receiving income at any time if her circumstances change in the future. 

Working assumptions:

These examples are based on a 20% tax-rate for an individual living in England or Wales and 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 investment growth on the amount left invested is calculated at 3% per year. It does not include charges which may apply. This is not an indication of what you may get in the future and is not guaranteed.

The growth rates applied in these examples do not include inflation. 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 above illustrations are not real life examples or recommendations.

Calculators and tools to help you plan

How much you could get from your pension

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.

Launch Pension pot calculator


How long your money could last

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.

Launch Retirement Income Planner


How tax could affect your income

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. 

Launch Income Tax and Tax Relief calculator


How much Emergency Tax you might pay

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

Launch Emergency Tax tool

See all calculators and tools


Important Q&As

Yes, and it’s a good idea to keep on top of your investments as your needs might change over time and you might, for example, be willing to take less risk with your money as you get older. An adviser can help with these decisions. Remember, the value of your investment can go down as well as up, so you might get back less than you put in.

No, you can take as much of your tax-free cash as you need and what remains in your pot could grow. Though as with all investments, you could get back less than you put in.

No, you have the control and flexibility over when you access your money and how much you wish to withdraw. 

No, if you don't take the full 25% tax-free cash, any money left in your pension pot, could grow including any remaining/ unused tax free cash. Though as with any investment your money could go down as well as up.

Looking for help?

Retirement and pensions can be tricky to understand. A financial adviser will guide you through the options and recommend the right solutions to meet your needs.

If you don't already have an adviser, we can help you find one.

Find an adviser

Other access options

Take a guaranteed income for life

(also known as an "annuity")

Find out more about this option

Take a combination of tax-free and taxable

(also known as "take some or all pension as cash")

Find out more about this option