Withdrawing all my pension


If you are 55 or over (57 from 6 April 2028), you can – if you choose to – withdraw all your pension pot in one go.

Could this big step be the right one for you? To help you decide, this page sets out the main things you should think about. Once you cash in your SIPP you can’t change your mind, so it’s important to carefully consider all the implications first.

Pension WiseIf you’re not sure, a regulated financial adviser will help you decide what’s best for your circumstances. Alternatively, free guidance is available from the Government service Pension Wise. Just remember this isn’t a substitute for personalised advice.

You might run out of money

When you withdraw your entire pension pot, it can no longer provide you with a regular income in retirement.

So firstly you need to consider the other sources of income or capital you can call upon, including other pension pots and your state pension. Will they be enough to meet your needs and regular outgoings throughout your retirement?

Your tax bill may be bigger

Another crucial consideration is tax. By withdrawing your whole pot at once, you’re likely to face a heftier bill from HMRC than if you withdrew it more gradually.

Although 25% of your withdrawal will be tax free, the remaining 75% will count as taxable income. Depending on the size of your pension (and on the amount of taxable income you have already) withdrawing the whole pot may push you into a higher tax band. This may mean you receive less than you expect.

Example: David has a pension pot worth £80,000. He has no other taxable income.

Scenario 1 – takes whole pot at once

If David chose to withdraw his entire pot, he’ll get 25% tax free, which comes to £20,000

The remaining £60,000 would be classed as taxable income. David would receive a total amount (net of tax) of £68,568.

Pot value £80,000
Total tax* = £11,432

*Tax:
0% on first £12,570 (personal allowance)
20% on next £37,700 (basic rate band) = £7,540
40% on last £9,730 = £3,892

Scenario 2 – staggers withdrawal over two years

Alternatively, if David chose to stagger the withdrawal of his pot over two years, he would stay within the basic rate tax band and could use an extra year of his personal allowance. Overall, it would mean a significant income tax saving of £4,460.

Year 1 Year 2
Tax free pension withdrawal - £10,000 (25% of £40,000)
Taxable pension withdrawal - £30,000
Tax year 1 = £3,486
Tax free pension withdrawal - £10,000 (25% of £40,000)
Taxable pension withdrawal - £30,000
Tax year 2 = £3,486
Tax:
0% on first £12,570 (personal allowance)
20% on next £17,430 = £3,486
  Total tax (year 1 + year 2) = £6,972

Please note, different income bands and rates of income tax will apply to Scottish taxpayers.

What else you need to consider

  • Overpaid tax – when you make a pension withdrawal, we deduct income tax automatically and pay it to HMRC. Depending on how much you withdraw, this could mean you overpay income tax initially. Learn more about pensions and tax
  • Future pension contributions lowered – after you withdraw your whole pot, the maximum amount you can pay into other pensions each tax year is £4,000. Learn more about the money purchase annual allowance
  • State benefits affected – withdrawing a large sum from your pension may also affect whether you’re entitled to means-tested state benefits, both now and in the future.
  • Pension tax advantages lost – by withdrawing your wealth from your pension, you'll lose some tax advantages when passing it on to your beneficiaries. Learn more about SIPPs and death

Ready to withdraw your whole pension?

If you've decided that withdrawing your pot in full is the right option for you, just log in to your account and select 'Manage my pension' from the 'My account' menu to get started.

Want to access your SIPP more gradually?

Accessing your whole pot in full won't be right for everyone. If you choose to withdraw your SIPP gradually instead, you have lots of different ways you can do it. Learn more about your pension choices at retirement.

Not sure what might be the best approach for you? We suggest you talk to a suitably qualified financial adviser. You can search for financial advisers on websites such as VouchedFor.co.uk, moneyadviceservice.org.uk and Unbiased.co.uk

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