Can I take all 25% tax-free in one go?

Yes — typically called a Pension Commencement Lump Sum (PCLS). The remaining 75% then sits in flexi-access drawdown or buys an annuity. This is irreversible and triggers the MPAA only when taxable income is drawn alongside.

Will the 25% always be available?

Yes for now. The £268,275 LSA cap means very large savers cannot get 25% tax-free on every pound. Specialist advice is sensible for anyone close to that cap or holding an old LTA protection.

What changes at age 57 in April 2028?

The Normal Minimum Pension Age rises from 55 to 57 from 6 April 2028. People who had a protected pension age before 4 November 2021 can keep age 55, but most people retiring after April 2028 will have to wait until 57 to draw a DC pension.

Pensions

The 25% tax-free pension lump sum

In short. Most UK pension savers can take up to 25% of each defined-contribution pension pot tax-free from age 55 (rising to 57 from April 2028). Since 6 April 2024 there is no Lifetime Allowance; instead a Lump Sum Allowance caps total tax-free lump sums at £268,275, and a Lump Sum and Death Benefit Allowance caps tax-free lump sums (including on death) at £1,073,100. Higher figures apply where Lifetime Allowance protections were registered.

The 2024 abolition of the Lifetime Allowance replaced the old single £1.0731m cap with two new lump-sum allowances. The income side of pension drawdown is now uncapped (subject to Income Tax), but tax-free lump sums are still limited.

Last reviewed: 26 May 2026Next review by: 26 November 20263 min read

How the 25% rule works

For a DC pension worth £100,000, up to £25,000 can usually be drawn tax-free. The remaining £75,000 stays in 'flexi-access drawdown', is invested, and is taxed as income when drawn.

The 25% is per pension scheme, not per person. Combining multiple pots (consolidation) before drawing means the 25% applies to the merged value — which can be helpful for planning but is irreversible.

The two new allowances (2024 onwards)

Lump Sum Allowance (LSA) — £268,275 total cap on tax-free pension lump sums in a person's lifetime
Lump Sum and Death Benefit Allowance (LSDBA) — £1,073,100 total cap on tax-free lump sums (including death-in-service lump sums and serious-ill-health lump sums)
Above each cap the excess is taxed at the recipient's marginal rate
Higher figures apply where the person registered a Lifetime Allowance protection (FP2016, IP2016, FP2014, etc.) before 6 April 2024

Practical points

Defined Benefit (final salary) schemes give a smaller tax-free 'commutation' lump sum, calculated by the scheme rules — usually well below 25% of the notional pot
The 25% can be taken in stages — each tranche is called an 'uncrystallised funds pension lump sum' (UFPLS), which is 25% tax-free with 75% taxed as income
Drawing any taxable pension income triggers the Money Purchase Annual Allowance (MPAA), capping further DC contributions at £10,000/year
Annual Allowance for total pension input remains £60,000 in 2025/26, tapered for high earners

FAQ

Can I take all 25% tax-free in one go?: Yes — typically called a Pension Commencement Lump Sum (PCLS). The remaining 75% then sits in flexi-access drawdown or buys an annuity. This is irreversible and triggers the MPAA only when taxable income is drawn alongside.
Will the 25% always be available?: Yes for now. The £268,275 LSA cap means very large savers cannot get 25% tax-free on every pound. Specialist advice is sensible for anyone close to that cap or holding an old LTA protection.
What changes at age 57 in April 2028?: The Normal Minimum Pension Age rises from 55 to 57 from 6 April 2028. People who had a protected pension age before 4 November 2021 can keep age 55, but most people retiring after April 2028 will have to wait until 57 to draw a DC pension.

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