What is pension drawdown?
Leaving your pension invested and taking money out as and when you need it, instead of buying an annuity. You can usually take up to 25% tax-free and pay Income Tax on the rest as you draw it. It is more flexible than an annuity, but the pot can run out if you take too much or investments fall.
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How is pension drawdown taxed?
Up to 25% of the pot can usually be taken tax-free, capped at £268,275 across all your pensions. Everything else you draw is added to your income for that tax year and taxed at your normal rates. Taking a large amount in one year can push part of it into a higher tax band.
Can I still pay into a pension after starting drawdown?
Yes, but once you take taxable money from a flexi-access drawdown pot, the most you can pay into defined contribution pensions with tax relief falls to £10,000 a year. This is the money purchase annual allowance. Taking only your tax-free lump sum doesn't trigger it, which matters if you're still working.
How much can I safely take from drawdown?
There is no official safe figure. It depends on the size of the pot, how long it needs to last, investment returns and your other income, including the State Pension. Taking too much early is the main risk. MoneyHelper's free Pension Wise service explains the options, and a regulated adviser can model withdrawals for you.
| Earliest age to take a personal or workplace pension | 55 (57 from 6 April 2028) |
|---|---|
| Tax-free lump sum | Usually up to 25%, capped at £268,275 in total |
| Money purchase annual allowance (after taxable withdrawals) | £10,000 a year |
| Standard annual allowance | £60,000 a year |
Source: GOV.UK — Annual allowance
Still not sure what this means for you?
Ask Helena, our AI assistant. She gives general information, not financial advice.