Accessing your pension savings

Your pension remains invested and you decide how much income to take, and how often. This allows for greater flexibility, giving you the freedom to amend things as your needs change. However, there’s always a degree of uncertainty around how much you could take in the future – nothing’s guaranteed. There’s even a risk that if you spend too much, or your investments don't perform as expected, your money could run out.

You can usually take up to 25% of your pension as tax-free cash – in one go, or in smaller chunks spread over time. For example, if you had £100,000 in your pension, you’d be able to take £25,000 tax-free, and then pay tax on the remaining £75,000.

Taking all your pension as cash could have an impact on the amount of tax you pay. For example, it could push you up into a higher tax bracket. It could also affect your entitlement to means-tested benefits like universal credit. Find out more by visiting the government’s website or the Department for Work and Pensions.  Tax treatment depends on your individual circumstances, including where you live. It’s also subject to change.

You’re not limited to just picking just one option. Many people choose to go for a blended approach to achieve a better balance. This might mean using a portion of your pension to set up an annuity, with the rest going towards drawdown – offering a degree of certainty and flexibility.

You might decide to leave your pension untouched and do nothing. Doing so could give your money more opportunity to grow in value, which might suit if you feel you need more time before you choose to retire.

Although remember, because your money is invested it could also drop in value. Another reason to leave your pension untouched is simply that you don’t need it just yet – maybe you have other sources of income that you’d rather use up first.