Take your whole pension in one payment

Your pension is designed to give you money to live on in retirement, usually so you can afford to stop working. This typically means paying you a regular income, often with money paid to your loved ones after you die.  

But you might be able to cash in your entire pension, so you get one lump sum. Your pension provider might call this taking an Uncrystallised Funds Pension Lump Sum or UFPLS.  

This option usually means you’ll lose a large chunk of your pension to Income Tax, which could affect how much you have to retire on.

If you save or invest your lump sum, you might have to pay more tax on the interest or investment growth than you would leaving it in the pension – growth within a pension is tax-free.  

The earliest you can take any of your pension money is usually age 55 (57 from April 2028), unless you need to retire early due to poor health or your scheme lists an earlier age.  

If you have a defined contribution pension, you can usually choose how and when to take your money 
This includes the option to take it all in one go – either as soon as you can access it or any time after. 

If you have a defined benefit pension (often called a final salary or career average scheme), you can usually only take it in one payment if: 

• the value of all your private pensions is less than £30,000 
• your scheme rules allow it 
• you’ve not cashed in another defined benefit pension in the last 12 months. 

Taking a defined benefit pension in one go is typically called ‘trivial commutation’ or a ‘trivial lump sum’ and means you’ll be giving up the promise of guaranteed income for life.  

Your pension provider will be able to explain the rules that apply to you, and what they need to value your other pensions. 

Our pension tax calculator can estimate how much tax you might need to pay to take your pension in one go, based on the Income Tax rates for England, Wales and Northern Ireland.  

Which? has a Pension tax calculatorOpens in a new window that includes the Scottish Income Tax rates. 

When you take a lump sum from your pension, 25% is usually paid tax-free – as long the total amount of tax-free cash taken from all your pensions isn’t higher than the lump sum allowance (£268,275 for most people).  

The other 75% counts as earnings and is added to your other income to calculate how much Income Tax you need to pay for that tax year (6 April to 5 April).

This often means you’ll pay a large tax bill to take all your money in one go, especially if the amount pushes you into a higher tax band.  

As well as budgeting for the tax you’ll need to pay, here are other things to consider before taking your pension in one go. 

Taking your entire pension means it’ll stop growing, so you’ll need to make sure you have enough to last your full retirement. 

You might also want to consider if your family would have enough money to live on after you die, as you’ll also lose any death benefits your pension promised to pay to your dependants – like a regular income to your partner and children.

To help, you can use our:

• Pension calculator to see how much you might need to retire on
• Budget planner to calculate your potential costs. 

The Retirement Living Standards also lists how much income you might need each year for a comfortable retirementOpens in a new window

When you pay into a pension, the government usually adds a top-up payment called tax relief. This is the money you’d normally pay in Income Tax. 

You can usually get tax relief on all your pension contributions up to the annual allowance. For most people, this means:  

• your contributions must be less than (or equal to) the amount you earn, and  
• contributions from you and your employer must be less than £60,000.  

But if you take taxable money from your defined contribution pension (like a single lump sum), the £60,000 limit reduces to £10,000. This is called the money purchase annual allowance (MPAA).  

The exception is if you take a small pension pot worth £10,000 or less in one go. This usually will not trigger the MPAA as small pot rules apply. 

If you set up your own pensions, you can use the small pot rules to take up to three of them in one go without triggering the MPAA. There are no limits for using small pot rules to take pensions set up by your employer. 

Money in a pension can grow tax-free, but if you take it out and invest or save it, you might pay Capital Gains Tax on the interest or investment growth you receive. Find out more in our guide How tax on savings and investments works. 

You might also have to pay extra tax if you put some or all of the money into a different pension scheme.

This is because pension recycling rulesOpens in a new window stop you from taking tax-free cash out of a pension and then paying it back in, so you get more tax relief. If you do this, you’ll usually have to pay tax worth 70% of the tax-free lump sum you received. 

A financial adviser will be able to explain the rules that apply to you and if paying money back into a pension is a good idea for you.  

If you’re considering moving money between pension schemes, you can use a pension transfer instead. Find out more in our guide Should I transfer or combine my pensions?    

If taking money from your pension increases your income or savings, this might affect any benefits you’re entitled to claim. 

You can use our Benefits calculator to check what you’re entitled to now and how it might change if your income or savings increased.  

You can also find free and confidential benefits adviceOpens in a new window using Advicelocal.

Any money held in your pension usually cannot be claimed by anyone you owe money to, even if you’re declared bankrupt or have a formal debt repayment plan. 

But if you take money out of your pension, you might be told to use it to make regular repayments or the whole lump sum could be claimed.  

Before taking pension money, you can talk to a free debt adviser to understand your options.  

If you take money out of your pension, your beneficiaries might pay Inheritance Tax to receive it after you die.  

Until April 2027, any money left in your pension will not be counted for Inheritance Tax purposes. But your beneficiaries might pay Income Tax to receive the money, depending on how old you are when you die.   

If you die before age 75, your pension can usually be inherited tax-free as long as: 

• the money is paid to your nominated beneficiaries within two years of your pension provider being aware of your death 
• the total amount inherited from all your pensions is not higher than the lump sum and death benefit allowance (LSDBA). 

The LSDBA is £1,073,100 for most people and counts tax-free lump sums taken from your pension before and after you die. This means your limit might be lower if you’ve already taken tax-free money.

Your beneficiaries will usually pay Income Tax on any amounts above the LSDBA.  

In all other cases, including if you die after age 75, your pension usually cannot be inherited tax-free. The inherited amount is normally added to your beneficiary’s other income to calculate how much Income Tax is due. 

Taking your pension in one go is not your only option – always compare all the ways you could use your pension to find the right option for you.  

If you have a defined benefit pension, you can choose to get a guaranteed income for life. This is based on your salary and how long you worked for that employer. 

If you have a defined contribution pension, you can choose to: 

• take multiple lump sums 
• take some tax-free cash (up to 25%), and: 
  • leave the rest invested in a flexible pension drawdown plan until you need it 
  • convert the rest into guaranteed income by buying an annuity 
  • set up a flexible income that you can stop or change at any time 
  • take the rest as one or more lump sums. 

It’s worth asking your pension provider if you have any special features before comparing your options.

For example, your pension might offer guaranteed annuity rates that would give you a higher guaranteed income than you could buy on the open market. 

If taking your pension in one go is right for you, here are the steps to take. 

Ask your pension provider: 

• if you can take your pension in one go 
• if they can use small pot rules – if you’re taking an entire pension worth less than £10,000 
• the information they need from you.  

If they do not offer the option you’d like, you could consider a pension transfer to a new provider. But you might not be able to transfer your pension if you have: 

• a share of your ex-partner’s pension following a divorce 
• a scheme with special features or guarantees, like a Guaranteed Minimum Pension. 

Your pension provider will be able to explain the rules that apply to you. 

To find a new provider, you’ll usually need to: 

• manually search for pension providers that let you take one lump sum, or 
• pay a regulated financial adviser to recommend a provider and product for you. 

You can use our Investment pathways comparison tool to find providers that will let you withdraw all your money. 

Do not withdraw or transfer your pension because of a cold call, visit, email or text. It’s likely a scam designed to steal your money. 

For more information, see our guide How to spot a pension scam.

When you’re ready to take your money, ask your provider to start the process of cashing out.  

If your earnings are likely to reduce in the next year, you might pay less tax by timing when you take your lump sum. This is because Income Tax is calculated based on your total earnings each tax year (6 April to 5 April).  

For example, if you earn £25,000 a year and take a lump sum of £30,000 from your pension, you would be pushed into a higher tax bracket. If you know your earnings for the next tax year will fall to £15,000 as you’re reducing your hours, you wouldn’t pay higher rate tax if you waited to take your lump sum. 

Pension providers typically use temporary or emergency tax codes when you take your first lump sum.  

This usually means you’re taxed as if you’ll receive that lump sum every month, so you might pay more tax than you should.  

If you think you’ve overpaid tax, you can check how to claim a tax refund Opens in a new window on GOV.UK. HMRC might also pay it back to you automatically at the end of the tax year.