# Phased retirement explained: easing into retirement income

> Pensions & retirement · Last updated 23 June 2026

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## Quick answer

Phased retirement means gradually reducing work and drawing pension income in stages rather than stopping work entirely at one date. It can smooth your tax bill and keep you earning while your remaining pension pot continues to grow.

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Skip this page if you need a personal recommendation or a live quote. This is general UK information — confirm today's figures with the official source linked below.

Phased retirement is increasingly common as people live longer and pension freedoms allow flexible access from age 55 (rising to 57 in 2028). Instead of a single retirement date, you might go part-time and draw part of your pension — reducing tax, maintaining social connections, and letting the untouched portion of your pot keep growing.

## Key facts

- You can access defined contribution pensions from age 55 (57 from 2028) while still working
- Drawing smaller amounts each year can keep you in a lower tax bracket than taking everything at once
- The first 25% of each withdrawal from a DC pension is tax-free; the rest is taxed as income
- Unused pension pots continue to grow tax-free inside the wrapper until you withdraw

## How phased retirement works

You reduce your working hours or move to consultancy while beginning to draw from one or more pension pots. Each withdrawal gives you 25% tax-free and the rest is added to your taxable income.

By keeping earned income moderate and drawing pension income in smaller tranches, you may avoid pushing into higher tax bands — especially the 40% or 60% traps.

## Tax planning in phased retirement

Your personal allowance (£12,570 for 2026/27) and the 0% starting rate for savings can absorb some pension income tax-free when combined with modest earned income.

Spreading withdrawals over several years uses multiple years' tax allowances rather than concentrating tax in a single year.

## Practical considerations

Check whether your employer's pension scheme allows partial drawdown while still employed. Some workplace schemes restrict access until you leave.

If you plan to claim Pension Credit or other means-tested benefits later, drawing pension income now may affect future eligibility — model both scenarios.

## Frequently asked questions

### Can I work and draw my pension at the same time?

Yes. There is no rule preventing you from earning and drawing a defined contribution pension simultaneously. Tax is the main consideration.

### Does phased retirement affect my state pension?

Your state pension is based on National Insurance credits, not whether you are drawing private pensions. Continuing to work may add qualifying years if you have gaps.

### Is phased retirement better than an annuity?

It offers more flexibility but carries investment risk on the uncrystallised pot. An annuity provides guaranteed income but less flexibility. Many people combine both.

## Primary source

https://www.gov.uk/plan-retirement-income

## Related

- [Pension tax relief explained](https://moneyguide.org.uk/pensions/pension-tax-relief-explained/)
- [Drawdown vs annuity](https://moneyguide.org.uk/pensions/drawdown-vs-annuity/)

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Independent UK money guidance from [Money Guide](https://moneyguide.org.uk). Information only — not regulated financial advice.