When can you withdraw from your pension?

Here is how old you need to be to start withdrawing from your pension:

Type of pension Age you can withdraw
Defined contribution (DC) pension55
Defined benefit (DB) pension*65
Self Invested Personal Pension (SIPP)55
State PensionVaries: check here
* Some let you withdraw from age 55, but this could reduce your retirement income.

DC and DB pension withdrawals

If you have a DC pension, you can withdraw up to 25% of your, tax free, when you retire. You will have income tax deducted on any amount you withdraw over this. For example:

  • Your pension is worth 200,000 and you withdraw 40% (80,000)

  • You pay no tax on 50,000 (25% of your pension)

  • You pay income tax on 30,000 (remaining 15% of total withdrawal)

If you have a DB pensions, withdrawals are calculated differently and each scheme has their own formula for making deductions.

You should contact your pension company to ask for more details if you want to withdraw a lump sum from your total DB pension fund.

How to claim

You will receive paperwork in the post up to six months before you can start drawing an income from your pension. This will:

  • Explain when you will start getting your monthly pension

  • Ask if you want to withdraw a lump sum payment worth 25% of your total pension pot

Making additional withdrawals

For DC pensions, the first 25% of any money you withdraw will be tax free, but the remaining 75% is taxed at your income tax rate.

This type of withdrawal is called an Uncrystallised Funds Pension Lump Sum (UFPLS).

For example, a withdrawal of 1,000 will give you 250 (25%) tax free, but the remaining 750 (75%) will be taxed at your rate of income tax .

SIPP withdrawals

A Self Invested Personal Pension is a type of defined contribution pension.

This means your pension is only worth as much as you have paid in, plus growth from any funds your pension has been invested in.

How to claim

You can claim on your SIPP in the same way you would if you had saved in a defined contribution pension with an employer.

You will be contacted by your pension supplier up to six months before you are eligible to claim on your workplace pension and given the option to withdraw up to 25% of your pension pot.

State Pension withdrawals

You have to wait until you reach your State Pension age before you can receive anything from your State Pension.

You cannot withdraw a lump sum from your State Pension, but do get a monthly payment that is based on how long you contributed National Insurance throughout your life.

How to claim

There are three ways you can claim your State Pension:

Alternatively, if you live abroad there are two ways you can claim your State Pension:

Can you withdraw your pension early?

This depends on the type of pension, so make sure you contact your pension supplier to find out when you can withdraw to find out if there are any charges.

If you need your pension money early to pay off debt, then speak to an independent financial adviser first who may be able to discuss an alternative solution.

What to do with your pension when you retire

Your pension supplier will usually offer you an annuity rate on your pension pot. This is how much they will pay you each year in return for keeping your pension money invested.

You do not need to accept what you are offered and can shop around to find a better rate with another company. Find out more about annuities here.

What is income drawdown?

This lets you reinvest your pension into a new investment that gives you an income based on the annual amount you want to draw from it.

For example, if your pension pot was worth 250,000, you could choose an annual income of 7,000 which will be deducted from your pot each year.

There are two types of income drawdown:

  • Flexi access drawdown: This option has been available since April 2015, and lets you take as much money as you like as an income.

  • Capped drawdown: This let you choose up to a set amount to withdraw each year, but this option was withdrawn from 6th April 2015.

Make sure you speak to an independent financial adviser before choosing an income drawdown product, as the amount you choose to withdraw each year could limit how long your income will last.