How much pension can I take tax free?

When you reach retirement age and decide to access your pension pot, you’ll typically receive 25% of the total amount tax free. There are two ways you can access your tax-free amount:

Take a typical 25% as a tax-free lump sum

You can typically take 25% of your pension as a lump sum and you won’t pay tax on it. If you choose to do so, with the remaining 75% you could purchase an annuity, take an adjustable income through drawdown or take what’s left as cash.

Spread your tax-free allowance across multiple withdrawals

If you choose to take multiple, smaller lump sums from your pension over time, you can typically claim your 25% tax-free allowance on each withdrawal you make. For example, if you withdraw £1,000, £250 will not be taxed, you will only be taxed on the remaining £750.

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