If you’re 55 or over (57 from 6 April 2028), you can – if you choose to – withdraw all your pension pot in one go.
It’s a big step. Once you cash in your SIPP, you usually can’t change your mind, so it’s important to carefully consider all the implications first. This page sets out the main things you should think about.
If you’re not sure what to do, a regulated financial adviser will help you decide what’s best for your circumstances. Alternatively, you can get free guidance from the Government service Pension Wise. Just remember, this isn’t a substitute for personalised advice.
You might run out of money
When you withdraw your entire pension pot, it can no longer provide you with an income in retirement.
So, you should consider the other sources of income or capital you can call upon, including other pension pots and your state pension. Will they be enough to meet your needs and regular outgoings throughout your retirement?
You’ll probably pay more tax
Another crucial consideration is tax. By withdrawing your whole pot at once, you’re likely to face a heftier bill from HMRC than if you took it in stages.
Although you can take up to 25% tax-free, the remaining 75% will be taxed as income. Withdrawing your whole pot may push you into a higher tax band, meaning you receive far less than you expect.
Example: David has a pension pot worth £80,000. He has no other taxable income.
Scenario 1 – takes whole pot at once
If David chooses to withdraw his entire pot, he’ll get 25% tax free, which comes to £20,000
The remaining £60,000 would be classed as taxable income. David would receive a total amount (net of tax) of £68,568.
Pot value = £80,000
Total tax* = £11,432
*Tax:
0% on first £12,570 (personal allowance)
20% on next £37,700 (basic rate band) = £7,540
40% on last £9,730 = £3,892
Scenario 2 – staggers withdrawal over two years
Alternatively, if David chooses to stagger the withdrawal of his pot over two years, he would stay within the basic rate tax band and could use an extra year of his personal allowance. Overall, it would mean a significant income tax saving of £4,460.
| Year 1 | Year 2 |
|---|---|
| Tax free pension withdrawal - £10,000 (25% of £40,000) Taxable pension withdrawal - £30,000 Tax year 1 = £3,486 |
Tax free pension withdrawal - £10,000 (25% of £40,000) Taxable pension withdrawal - £30,000 Tax year 2 = £3,486 |
| Tax: 0% on first £12,570 (personal allowance) 20% on next £17,430 = £3,486 |
|
| Total tax (year 1 + year 2) = £6,972 |
Please note, different income bands and rates of income tax will apply to Scottish taxpayers.
What else do you need to consider?
Overpaid tax – when you make a SIPP withdrawal, we must deduct income tax automatically and pay it to HMRC. This could mean you overpay income tax initially, and need to claim money back from HMRC.
Learn more about pensions and tax
Future pension contributions lowered – after you withdraw your whole pot, the maximum amount you can pay into other pensions each tax year is £10,000.
Learn more about the money purchase annual allowance
State benefits affected – withdrawing a large sum from your pension may also affect whether you’re entitled to means-tested state benefits, both now and in the future.
Pension tax advantages lost – by withdrawing your wealth from your pension, you'll lose some tax advantages when passing it on to your beneficiaries.
Learn more about SIPPs and death
Want to access your SIPP more gradually?
Accessing your whole pot in full won't be right for everyone. If you choose to withdraw your SIPP gradually instead, you have lots of different ways you can do it. Learn more about your pension choices at retirement.
Ready to withdraw your whole pension?
If you've decided that withdrawing your pot in full is the right option for you, just log into your account and access the 'Manage my SIPP' page.
To find out more about your options, have a read of our guide to accessing your pension and guide to drawdown. If you decide you're ready to go ahead, log into your account online and navigate to the 'Manage my SIPP' screen.
Important information: These articles are for information purposes only and are not a personal recommendation or advice. If you're not sure about the risks, please speak to a financial adviser. Tax treatment depends on your individual circumstances and rules may change. Pension rules apply
The flexible way to access your pension – you choose how to invest it, what income to take, and when.
You've saved hard for your retirement, but once you get there, what are your options?
Written by:
Charlene Young
Pensions and Savings Expert
Charlene Young is AJ Bell’s Pensions and Savings Expert. She joined AJ Bell in 2014 from a wealth management firm where she worked with private clients and small businesses as a financial planner.
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