Updated on 6 April 2026

Pension withdrawals: thinking ahead

If possible, it is a good idea to plan ahead before taking money from your pension. Here we look at why this is important and introduce some of the key considerations to be aware of. 

A dark coloured background with 2 wooden blocks, each block has a word written on it, together this reads 'THINK AHEAD'
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Content on this page:

Overview

It is important not to rush a decision on your pensions, if you can avoid it.

It is a good idea to consider a range of factors, including:

  • your current circumstances (personal and financial)
  • future plans 
  • the method of withdrawal (for example, for defined contribution pensions this would mean thinking about whether to purchase an annuity or draw down on your pension pot flexibly, or a combination of the two)
  • investment choices
  • the consequences for tax, universal credit and other state benefits
  • how your income and tax position might change when you start to receive the state pension 
  • charges you might incur if you take pensions early.

It is recommended that you consider taking professional advice when making decisions. 

  Beware of pension scams. If you are contacted by someone who says that they can arrange for you to access your pension fund before you have reached the normal minimum pension age, this may be a scam. You can read more about pension scams in our guidance.

Tax considerations

As set out above, there are many reasons why it is good to plan. We are not able to discuss all of these in detail, but we draw out some of the important tax issues that you will need to think about, such as:

  • You might pay less tax on money from pensions if you take it in stages, spread it out over a number of tax years, or wait until after you have stopped work. We look at this in the example below.
  • You can trigger a large tax bill when you take taxable lump sums from pensions under flexi-access arrangements. 
  • You might also incur a further cost, for example by creating a high income child benefit charge, or by affecting your entitlement to means-tested state benefits. We discuss these in more detail in our page Pension income: impact on state benefits.
  • If you’re accessing your pension flexibly, you might have options for taking your tax-free amount in a single lump sum or spread over a number of payments or tax years.  
  • Taking a large taxable lump sum might cause you to become a higher or additional rate taxpayer, you may also lose the ability to claim the marriage allowance, lose all or part of your personal allowance and you may also face restrictions to your personal savings allowance.
  • If you are repaying a student loan and you have to fill in a Self Assessment tax return, taxable amounts that you take out of pensions can affect your repayments.

Planning ahead could therefore save you a great deal in potentially unnecessary tax charges and adverse impacts to your benefits position. 

Example – taking pension in stages

Hamish retired in March 2021 at the age of 60. He was able to access his personal pension pot of £80,000. 

Having taken advice, Hamish decided to draw on his pension under the 'pensions flexibility’ rules rather than purchase an annuity.

He initially took 25% from his pension as a single tax-free lump sum, leaving £60,000. Hamish decided to draw the remaining £60,000 over the next six tax years starting from 2021/22, that is, £10,000 in each tax year up to 2026/27. He has no other taxable income in those years and therefore pays no tax at all on the pension withdrawals. This is because his pension income is covered by the standard personal tax allowance which is set at £12,570 in each tax year that he takes a pension payment. 

Hamish must remember that his state pension will be fully taxable, but he will not start receiving this until he is aged 67 – which will be in tax year 2027/28 after he has finished drawing his personal pension pot.

For more information on the tax implications of making pension withdrawals, see our page Tax on pension income.

  Undrawn pension pots are currently exempt from inheritance tax, but this exemption will be removed from 6 April 2027. You can read more about what happens to a pension when the person dies on our separate guidance page.

Non-tax considerations

As already mentioned, tax is not the only factor when deciding when and how to access your pension – there might be other reasons you need more money sooner. You will need to think about possible future changes in your circumstances and you will have other investment-based issues to think about. We cannot cover those on this website, but we do strongly suggest you take advice and think about the tax situation very carefully before acting.

Further sources of help

The government’s MoneyHelper website may be useful for:

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