Calculate how much of your pension you can take completely tax free. Most people can take 25% of their pension pot as a tax-free lump sum — up to a maximum of £268,275.
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When you start taking money from your pension, you are usually entitled to take 25% of your pension pot completely tax free. This is known as the Pension Commencement Lump Sum (PCLS) or "tax-free cash".
Since April 2024 there is a Lump Sum Allowance of £268,275. This is the maximum total tax-free cash you can take from all your pensions combined during your lifetime. Most people will never come close to this limit, but high earners with large pension pots should be aware of it.
The traditional approach is to take 25% of your entire pot as a single tax-free lump sum when you start drawing your pension. The remaining 75% is kept invested (in drawdown) or used to buy an annuity, and any income taken from it is taxable.
An alternative is to take smaller withdrawals over time, with 25% of each withdrawal tax free and 75% taxable. This can be more tax efficient if it keeps you in a lower tax band, and it keeps more of your pot invested for longer.
If you have a pension pot of £200,000:
This calculator is designed for defined contribution (money purchase) pensions — personal pensions, SIPPs and workplace money purchase schemes. Defined benefit pensions calculate tax-free cash differently — speak to your scheme administrator.
Once you have taken your tax-free cash, any further withdrawals are taxed as income at your marginal rate. Use our Pension Drawdown Tax Calculator to plan your withdrawals tax-efficiently.