Can I Withdraw Money From Pension Fund

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Withdrawing money from your pension

There's a lot to think about when you withdraw money from a pension, but we're on hand to guide you through the process.

What you need to think about first

Taking money out of a pension is a major decision. So, before you request your withdrawal, there are a number of areas that you need to think about carefully. If you are unsure what the right choice is for you, or what the relevant tax implications might be, we recommend that you speak to an independent financial adviser.

It may help if you take a look at our tools and calculators, and ask yourself the following questions:

Have you considered all of your retirement income options?
We will send you information about the options that are available to you six months before your retirement age. It is usually possible to take a quarter (25%) of your pension pot as tax-free cash. You then have the option of setting up a guaranteed income for life (an annuity) with the rest, or you can withdraw your money as one or more lump sums, or take a flexible or regular income. Not all pension plans offer all these options.
You also don't need to take all your tax free cash in one go if you don't need all of it right now, and you can also take out lump sums made up of both tax-free and taxable cash. These are technically known as 'Uncrystallised funds pensions lump sums'.

You should get impartial information on retirement income options from the free Pension Wise service - either visit the Pension Wise website or call them on 0800 138 3944.
How much are you going to withdraw and will this leave you with enough money to live on for the rest of your life?
A guaranteed income (an annuity) will last for as long as you live, but if you withdraw lump sums from your pension or take a flexible or regular income, there is no guarantee that the money in your pension will last as long as you need it to. Our Pension Drawdown Calculator will help you see how long your money might last, or if you're looking for a guaranteed income, our quotation portal will let you know how much income you might receive.
When planning a withdrawal, you should think carefully about how much you need to live on in later years. You may want to explore our Retirement Budgeting Calculator, which will help you work out how much you may need.
How will you invest the money that is left in your pension?
Unless you withdraw all the money in your pension in one go, you will have some left in the account, and you need to decide how you would like to invest it. You will have the same range of funds to choose from as before your withdrawal. If you decide just to take tax-free cash, you will have a Pension Drawdown Account, which may also give access to four Investment Pathways, each of which is based on a different retirement income objective.
Have you thought about taking personalised advice on what is the right option for you?
If you don't know what to do, consider getting advice that is tailored to your particular circumstances. We can give you information about your options but we cannot tell you what you should do. If you need that sort of help, you can use the Money Advice Service Retirement Adviser Directory or visit unbiased.co.uk to find the right adviser for you.

Requesting your withdrawal

Once you have decided to make a withdrawal, you should call us on 0800 3 68 68 73 between 8am and 6pm on a UK business day. A member of our retirement team will guide you through the process over the phone. Please allow up to an hour for the initial phone call as there is a lot we need to cover. We appreciate that this may seem a long time, but we find that plan members tend to prefer doing it this way than completing a long, complicated form.

You may need to make an active decision about how you would like to invest any money that is left in your pension after your withdrawal. You will be able to choose from all the funds you currently have access to and you may also have access to our four Investment Pathways. These are simple, good-value options designed around a range of retirement income goals.

Once we have all the details of the withdrawal you are planning, we will send you details confirming everything we have discussed on the phone. The letter will contain a pension withdrawal declaration which you will need to read and sign to confirm that you want to go ahead with the withdrawal.

How long will your withdrawal take?

We will start working on your withdrawal as soon as we receive your signed declaration. If you are withdrawing a lump sum, it should take around seven working days for the money to arrive in your bank account. We usually need 18 working days to set up regular income payments. This means that if we receive your form less than 18 working days before a scheduled payment date, you may receive your first payment the following month. We will write to you confirming when your first payment will be.

Choosing income options FAQs

What are my income options at retirement?

You can keep your pension pot where it is

You can delay taking money from your pension pot to allow you to consider your options. Reaching age 55 or the age you agreed with your pension provider to retire is not a deadline to act. Delaying taking your money may give your pension pot a chance to grow, but it could go down in value too.

You can take your whole pension pot in one go

You can take the whole amount as a single lump sum. A quarter (25%) of your pension pot can usually be taken tax-free – the rest will be taxed. You will need to plan how you will provide an income for the rest of your retirement.

You can take your pension pot as a number of lump sums

You can leave your money in your pension pot and take lump sums from it as and when you need, until your money runs out or you choose another option. You can decide when you make withdrawals and how much to you take out. Any money left in your pension remains invested, which may give it a chance to grow, but it could go down in value too. Each time you take a lump sum, normally a quarter (25%) of it is tax-free and the rest will be taxable. You may need to move your pension to a different provider to do this.

You can take a flexible retirement income

You can leave your money in your pension and take an income from it. Any money left in your pension remains invested, which may give it a chance to grow, but it could go down in value too. A quarter (25%) of your pension pot can usually be taken tax-free and any other withdrawals will be taxable, whether you take them as a regular income or as lump sums. You may need to move your pension to a different provider to do this.

You can get a guaranteed income for life

A lifelong, regular income (also known as an annuity) provides you with a guarantee that the income will last as long as you live. A quarter (25%) of your pension pot can usually be taken tax-free and any other payments will be taxed.

You can choose more than one option

You can choose different options at different times or for different parts of your pension pot, depending on what suits your needs.

Need more help? If you would like to find out more about these options, visit the Pension Wise website.

What is a flexible retirement income?

Flexible retirement income allows you to leave your money in your pension and take a regular income or lump sums from it when you like Any money left in your pension remains invested, which may give it a chance to grow, but it could go down in value too. A quarter (25%) of your pension pot can usually be taken tax-free and any other withdrawals will be taxable, whether you take them as a regular income or as lump sums. You may need to move your pension to a different provider to do this.

If you decide to take a flexible retirement income from your pension, you may have a Pension Drawdown Account. In this case, you will need to decide how the money in the account is invested. You will be able to choose from the same range of funds that were available before you had a Pension Drawdown Account, along with four Investment Pathways, each of which is based on a different retirement income objective.

What is the difference between flexible income and lump sums?

These options can be similar and the main difference is how the tax is paid.

When you take a number of lump sum, a quarter (25%) of each lump sums is normally tax free and the rest is taxable.
When you choose a flexible income you usually take a quarter (25%) of your whole pot as a tax-free lump sum at the start, and any future payments are taxable.

With both options, the rest of your pension pot stays invested and you will be able to choose from the same range of funds that were available before your withdrawal. If you decide to take a flexible retirement income, you may have a Pension Drawdown Account. In this case, you will also have access to four Investment Pathways, each of which is based on a different retirement income objective.

Leaving some of your pension pot invested may give it a chance to continue growing, but it could go down in value too.

With both options, you can pass money on after you die. The person who receives it can take it as a lump sum or as an income but they may pay tax on it if you are 75 or older when you die. Your beneficiaries have to move the money they receive from your pot to another company to be able to receive your money in the way they want.

Unlike a guaranteed income for life (an annuity), flexible income and lump sums may not last as long as you live. The more money you take out each time, the less money is left to provide a future income.

If you are using these options to provide your retirement income, you should seek advice or guidance on the investments in your account and how much money to take.

Pension providers may charge a fee for operating pension pots in this way. We recommend that you take advice on whether this is the right option for you and the level of income you should take.

What are my options in terms of guaranteed income for life?

There are a number of different types of guaranteed incomes for life. You can find out more about them with our guaranteed income guide.

A 'level' guaranteed income will always pay you the same amount. But as you get older, inflation may mean you can buy less with the same income.

An 'escalating' guaranteed income increases over time to keep up with inflation. Your income will start at a lower level and will increase each year.

If you smoke, have high blood pressure, are on prescribed medication or have a medical condition, you may be eligible for an 'enhanced' guaranteed income (also known as an 'impaired', 'lifestyle' or 'underwritten' annuity). These tend to pay a higher amount of income on the basis that your life is expected to be shorter and so the income will not be paid for as long.

A guaranteed income that provides an income just for you is known as a 'single life annuity'.

Some guaranteed incomes can provide an ongoing income for a nominated dependant, typically your partner, if you die. These plans (known as 'joint life annuities') provide a slightly lower income but payments will continue to your dependant after you die or for a guaranteed period.

You could also consider an annuity with 'value protection'. This means that, if you die without having received the full value of your pension pot, a lump sum will be paid to your beneficiaries equal to the original amount you paid for the annuity, minus the total payments already made and tax. As a result, value protection enables you to protect up to 100% of your original pension pot.