How many times can you take 25% tax-free from your pension?
Asked by: Genevieve Konopelski | Last update: February 7, 2026Score: 4.7/5 (74 votes)
You can take 25% tax-free from your pension multiple times as smaller lump sums, or split across different pension pots, as long as you stay within the overall tax-free lump sum allowance (currently £268,275 for most people) and your pension provider allows flexible withdrawals, allowing you to access funds as needed rather than all at once. Each withdrawal splits into 25% tax-free and 75% taxable, which is taxed as income, potentially pushing you into a higher tax bracket.
Can I withdraw 25% of my pension tax-free every year after?
How it works. With this option, each time you take money from your pension pot, 25% of it is usually tax free and you may pay tax on the other 75% of each lump sum. Different amounts can be taken each time with the remainder of your money staying invested, giving it a chance to grow.
How many times can you take 25%?
You take 25% tax free and the rest gets taxed. But here's the surprise – you might be able to do it more than once. It all depends on how your pensions are set up. If you've got more than one pension pot, or the right kind of scheme, you could unlock that 25% benefit multiple times.
What is the 5 year rule for pension?
The "pension 5-year rule" refers to different IRS rules for retirement accounts (like Roth IRAs needing 5 years for tax-free earnings), beneficiary rules (requiring heirs to empty inherited accounts within 5 years), and specific employment pensions (like Federal or Congressional plans requiring 5 years of service for vesting or benefits). It can also relate to UK pension rules for overseas transfers (QROPS) or breaks in service for public sector workers, preventing tax avoidance or loss of benefits.
What are the new rules for pension withdrawal?
The new 2025 regulations have reduced the mandatory annuity requirement from 40% to 20% for eligible non‑government subscribers. The Over ₹12 Lakh Threshold: If your accumulated pension wealth exceeds ₹12 lakh, you can now withdraw up to 80% as a lump sum. You only need to use the remaining 20% to purchase an annuity.
Increase Your 25% Tax Free Pension Lump Sum | UK Pensions
How many times can I withdraw from my pension?
You can keep withdrawing and paying in. Your pension provider sets a maximum amount you can take out every year. This limit will be reviewed every 3 years until you turn 75, then every year after that.
How many times can you withdraw from your pension fund?
A member may make a partial or full withdrawal of the funds once a year. The only limit is that the member must withdraw a minimum of R2 000, which means the balance in the fund must be at least R2 000. There is no cap on how much the member can withdraw.
How much money can you have in the bank and still get a full pension?
How much money can I have in the bank before it affects my pension? It depends on your total assessable assets. For example, homeowner couples can have up to $481,500 in combined assets, including bank balances, before their pension is reduced.
Can I draw a lump sum from my pension?
Take cash lump sums
You can take your whole pension pot as cash straight away if you want to, no matter what size it is. You can also take smaller sums as cash whenever you need to. 25% of your total pension pot will be tax-free. You'll pay tax on the rest as if it were income.
What year does pension age change to 67?
The government has announced that the State Pension age (SPa) timetable will, for the time being, remain unchanged from the current legislated timetable: SPa will increase from 66 to 67 – between April 2026 and April 2028. SPa will increase from 67 to 68 – between April 2044 and April 2046.
Is it worth taking 25 percent of your pension?
If you withdraw 25% of your pension savings, you're immediately reducing the value of your pension pot. And you're also taking away the chance for that money to potentially grow through returns on investments.
When can I take a tax-free pension lump sum?
Retiring or Taking a Pension Before 59 1/2
If you take a distribution from your retirement plan early (meaning before the day you turn 59 1/2), you'll generally have to pay a 10% early distribution tax above and beyond any regular income taxes you may owe on the money.
What is the 6% rule for pensions?
The pension 6% rule is a guideline to help you choose between a lump-sum payout or monthly pension payments, suggesting that if the annual pension amount is 6% or more of the lump sum, take the monthly payments, but if it's less than 6%, the lump sum might offer better financial growth potential when invested. To calculate: (Monthly Pension x 12) / Lump Sum = Percentage; a higher percentage favors monthly payments, a lower one favors the lump sum, but personal factors like health, inflation, and risk tolerance also matter.
Is it better to take a lump sum payout or monthly pension?
A lump sum offers control, investment growth potential, and inheritance, while a monthly pension provides guaranteed, inflation-adjusted income for life, reducing longevity risk but ceasing payments on death (unless a survivor option is chosen). The best choice depends on your health, financial needs, investment skill, and desire for flexibility vs. security, with monthly being better for longevity and lump sum for flexibility or early death scenarios, often compared using a simple "6% test".
How do I avoid pension tax?
The key to a tax-free pension rollover is to keep your pension distribution intact in a rollover account until you reach age 59 1/2. Or, should you absolutely need to tap into your pension funds before then, do so sparingly and wisely.
How much will I lose if I take my pension at 55?
It's as simple as it sounds; you can withdraw the whole pension without penalty. However, there could be tax implications depending on the size of the pension pot. You'll get the first 25% as a tax-free lump sum, but you'll need to pay tax on the remaining 75%.
Can I take 25% of my pension tax-free every year?
From age 55 (57 from April 2028), you can usually take up to 25% of your pension money without needing to pay any tax. This is called a tax-free lump sum.
What are the risks of taking a pension lump sum?
If you choose a lump-sum payout instead of monthly payments, the responsibility for managing the money shifts from your employer to you. In addition, you increase the risk of outliving your money and losing your money due to bad investment advice, fraud, or poor stock market performance.
Is it better to take a bigger tax-free lump sum from pension?
When considering how much money you want to take out as a lump sum, think about its tax implications. Taking out a lot in one go could cost you more in tax than taking out smaller amounts spread out over several years.
How much can a pensioner have in the bank before it affects benefits?
If you have £10,000 or less in savings and investments this will not affect your Pension Credit. If you have more than £10,000, every £500 over £10,000 counts as £1 income a week.
What is a good pension amount?
For people aged 60, Fidelity's retirement savings guidelines recommend an amount in savings worth six times your salary in order that you have enough to maintain your standard of living in retirement. So, someone earning £60,000 would need £360,000 in savings - which can mean money both inside and outside of pensions.
How many times can I withdraw money from my pension?
There's no limit on how much money you can take out of your pension fund each year. The money in your pension fund needs to carry on growing to replace what you are taking out. So you'll need your fund to be wisely invested to make sure you don't lose out.
What is the maximum withdrawal from a pension account?
There is a minimum amount you must withdraw from your account-based pension annually, which is calculated as a percentage of your account balance. There is no maximum amount - you can withdraw as much as you like from your account each year.
What are the rules for pension withdrawals?
Generally, withdrawals from retirement accounts before age 59 ½ may incur a 10% early withdrawal penalty. However, there are exceptions, such as certain medical expenses, disability, or a first-time home purchase, which may allow for penalty-free withdrawals.