What can I do with my pension pot?

A defined contribution pension lets you build up a pot of money to use at retirement. The amount you get depends on: 

• how much is paid in 
• how well the investments perform 
• the fees and charges you pay 
• when you choose to take the money. 

This means the value of your pension can rise and fall until you take the money out.

You can use our tool to find out your pension type or ask your pension provider. 

Defined contribution pensions are now the most common type. But if you have an old pension scheme or work in the public sector (like education, the NHS or the Armed Forces), you might have a defined benefit pension instead. These are often called final salary or career average schemes.  

The earliest you can take money from your pension is usually age 55 (57 from April 2028), unless: 

• you need to retire early due to poor health, or 
• your pension provider lists an earlier protected minimum pension age. 

Most pensions are designed to pay out at your normal pension age (NPA). The NPA varies between pension schemes but is often age 60, 65 or the same as your State Pension ageOpens in a new window. This means you might get less than expected if you take your money earlier. 

You don’t have to start taking money from your pension pot when you reach your pension provider’s normal pension age (NPA). You can leave your money invested in your pot until you need it.  

Pension providers often move your money to lower risk investments the closer you get to your normal pension age. If you don’t want to use your money then, it’s a good idea to review your investment options as you might miss out on extra growth.  

When you’re ready to take your pension money, you usually have several options. If your pension provider doesn’t offer the option you’d like, you could consider transferring your pension to a provider that does.  

All options let you take up to 25% tax-free, provided it’s taken as one or more lump sums and the total tax-free cash from all your pensions isn’t higher than the lump sum allowance (LSA). The LSA is £268,275 for most people. 

You can take some of your pension as a tax-free lump sum (up to 25%) and keep the rest invested. This is called pension drawdown or flexible retirement income.  

You don’t have to take the full 25% as a tax-free lump sum, or any at all. The more you take now, the less you’ll have to give you an income later.   

As most (or all) of your pension will stay invested, you can decide how much to take out and when, which could be a regular income or lump sums as and when you need them. This is usually taxed along with any other earnings. You might also be able to continue paying in – you can benefit from tax relief on your pension contributions until age 75. 

While your money is invested, the value of your pension can still rise and fall until you take it out. This means there’s a risk it could run out if you take too much too soon. 

You can take some of your pension as a tax-free lump sum (up to 25%) and convert the rest into a regular and guaranteed income. This is called buying an annuity.  

You don’t have to take the full 25% as a tax-free lump sum, or any at all. The more you take now, the less you’ll have to give you an income later.  

With the rest (or all) of your pension, you can usually choose to buy guaranteed income: 

• for the rest of your life – called a lifetime annuity 
• until a set date – called a fixed-term annuity. 

How much you can get depends on the price of annuities at the time. Always check if your pension plan contains guaranteed annuity rates, as these might be better than you can get on the open market. 

You can leave all your pension invested and just take money from your pension as and when you need it.  

25% of each lump sum you take is tax-free and the rest is taxed along with any other earnings. You can also continue paying in – you can benefit from tax relief on your pension contributions until age 75. 

As your money is still invested, the value of your pension can still rise and fall until you take it out. This means there’s a risk it could run out if you take too much too soon. 

You can take all the money in your pension in one payment. You can then decide how to spend, invest or save it to make sure you don’t run out of money. 

25% is paid tax-free and the rest is taxed along with any other earnings. This means you might pay more Income Tax on the money than other options, as it would be paid in one tax year. 

You can usually choose more than one way to take your pension. Some providers also offer products that mix two or more options. 

For example, you could: 

1. take a tax-free lump sum at age 60 
2. use pension drawdown to keep the rest invested 
3. take income and/or lump sums as and when you need them 
4. convert what’s left into a guaranteed income at age 65.  

If you have multiple defined contribution pensions, you can choose different options for each. For example, you could convert one into a guaranteed income and leave the other one invested until you want to take lump sums.   

To help understand the options for taking your pension, you can have a free Pension Wise appointment. This explains: 

• when you can take your pension 
• the different ways you can take money 
• how each option is taxed 
• how to spot and avoid scams. 

You’re eligible for an appointment if you have a UK-based defined contribution pension and are: 

• 50 or over 
• under 50 and: 
  • retiring early due to poor health  
  • have inherited a pension. 

You can start an instant online appointment or book a date and time with a pensions specialist.  

If you have any questions about your pension, our pension specialists can help – it doesn’t matter how old you are. 

How you choose to take your pension can affect how comfortable your retirement is.  

A regulated financial adviser can help you plan for retirement, including:  

• recommending products and providers to use 
• advising where to invest your money 
• explaining your options to reduce the tax you might need to pay.  

Our tool can help you find a retirement adviser or see our guide Choosing a financial adviser for more information.   

Financial advisers must tell you how much you need to pay before you commit.