Take cash from your pension plan

Want to take cash from your pension plan?

You can usually start taking lump sums from your pension plan once you reach age 55 (subject to change). You decide how much to take and when to take it, you can even take the full value of your pension plan in one go. It's worth remembering that you can run out of money if you take too much, or if you live longer than expected. How long your money lasts also depends on how your investments perform.

There are other ways to take money from your pension plan. You can set up a guaranteed income for life (annuity) or take a flexible income (drawdown) at any time. We’ve compared the different options below to help you decide what’s best for you.

Other important things to think about

Before you start taking cash, there are a few other key things to think about to help you make the most of your tax allowances and to help make your money last longer.

• Do you need the money now?
  Delaying taking your money can have some benefits. The value of your plan could go up if the investments perform well. You might also choose to delay taking your money until you’re in a more favourable tax position. For example, if you’re still working you might not want to take your pension money as well as it could push you into a higher tax band. Whereas if you wait until your income is lower before accessing your pension money, you might be in a lower tax band and pay less tax. Keep in mind that the more money you take now, the less you’ll have in future, and anything you take over your tax free cash will be subject to income tax.
• Taking too much could push you into the next tax band
  You could pay more tax if your cash withdrawal and any other income in that tax year push you into a higher tax band. You may pay less tax if you spread out your cash withdrawals over several years and keep below higher rate bands.
• Payments into your pension plan could be restricted
  Taking out more than your tax-free cash will lower the payments you or an employer can make to any of your defined contribution pensions. It will drop to £4,000 a year from your usual annual allowance. This can be a problem if you still want to keep paying into your pension plan after you start taking money from it. Read our guide for more information about the annual allowance.
• Taking cash could affect your state benefits
  Any means-tested state benefits you receive may be affected if you take cash or income from your pension plan. It’s worth checking this isn’t going to be a problem before taking cash.