How do I take money from my pension?

Different pension types have different rules. Sometimes it’s as simple as asking your pension provider for the money. If they don’t allow it, you can usually transfer to one that does.

The quick and easy guide to taking money from your pension

If you want to know how to take money from your pension then this guide is for you. It explains which pensions you can and cannot take money from, how to go about taking that money and covers a host of other things to consider.

The headline facts at a glance

How you take money from your pot very much depends on the type of pension you have. In some cases you can ask your pension provider to transfer the money to you. A lot of the time, though, if you want to take money from your pension you do need to get financial advice first. Before we go into any more detail on how you take money from your pension, or even if you should, you need to check whether you can.

Can you take money from your pension?

The government has set a minimum age for taking money from your pension: 55-years-old. If you are under 55 then you can only release money in exceptional circumstances, such as critically poor health.

The only other barrier to taking money from your pension is if you have what is known as an unfunded scheme. This type of pension covers a number of public sector workers including teachers and employees in the emergency services, armed forces and the NHS. Your HR department should be able to tell you if your pension is unfunded or not.

If you don’t have an unfunded scheme and are at least 55 years old, the chances are you can take money from your pension. Let’s look at how.

How do you take money from your pension?

The best thing to do is talk with a financial adviser first. Not only will they review your current pension arrangements, they can also sort everything out for you, including transferring the money you want to take directly to your bank account. They will also show you how much tax-free cash you are entitled to as well as the tax implications if you choose to take more than this amount.

In many cases the adviser will first need to transfer your existing pension, or pensions, to a new scheme. This is because you cannot take money directly from a lot of older schemes, and it’s likely that a modern scheme would outperform your existing one anyway. So, even if you don’t have to switch pensions to take money from your pot, it often makes sense to do so.

Finally, there are work pensions that promise to pay you an income for life when you retire, based on a number of factors. These are often called final salary schemes and generally include restrictions as to how much money you can take from them, if any. So again, you would need to switch to a new pension scheme to access the money you want. A word of warning, though…

Should you take money from your pension?

This is the big question and the important thing to consider is what impact it will have. Taking money out of your pension to clear a debt or tackle the mortgage could make a big difference to how you live your life now; on the other hand it may reduce the money available to you in retirement. And if you transfer out of a final salary scheme you will almost definitely be giving up some great benefits, such as that income for life.

The simple fact is pensions are very complicated and there is a lot to consider if you are thinking of taking money from your pot. That’s why it is best to talk with a regulated financial adviser before you make any decisions.

We have already helped thousands of clients to take money from their pension, and if we don’t think it’s the right thing to do then that is exactly what we will advise. The best part is, it won’t cost you a penny to find out what we think the right decision is for you.

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More information…

We have included below answers to some of the most common questions we are asked. And if you do need more information then why not give us a call and we can talk it through with you

Why should I take financial advice before withdrawing money?

Financial advisers are here to help you make the best decisions about your money. Talking to someone who knows pensions inside and out gives you the peace of mind that you are making a truly informed decision that is in your best interests. There are also some situations where you must take advice before transferring your pension to take money from it, so that you are fully aware of any benefits you could be giving up.

How much tax will I pay if I take money out of my pension?

Except for the 25% tax-free lump sum, pension withdrawals are treated as income. If you are a basic-rate taxpayer you will pay 20% on any money you take out of your pension, although it is worth remembering that large withdrawals could push you into a higher tax bracket. In this case, you could pay income tax at 40% or even 45%.

Can I pay into a pension if I have taken money out of it?

Yes, you can. You might, for example, decide to use your tax-free cash at 55 and then continue paying into the pension until you retire. The main thing to consider is that taking more than the 25% tax-free amount from your pension may reduce the amount of money you can pay into your pension each year and receive tax relief on. 

Call 0800 304 7288 for a friendly chat about your pension

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Stephen finished his documentary

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Alan's pension release story

Pension cash enabled Alan to clear debts

Alan had credit cards charging high rates of interest. Taking some tax-free cash from one of his pensions allowed Alan to clear the cards, and the rest remained invested for the future. Click the link below to watch Alan's story.


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Finding old pensions changed Mark’s future

Mark wanted us to find his pensions from previous jobs. Tracking them down gave him almost £20,000 more for the future. We then combined them into a single pension fund, giving more control than before. Click the link below to watch Mark's story.


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Frequently asked questions

Important information

A quick reminder that the tax you pay depends very much on the current rules and your personal circumstances, and so could change in the future.

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