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:
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.
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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