Overview
- Under current rules, each pension withdrawal is treated as 25% tax‑free with the remaining 75% taxed at the saver’s marginal income tax rate.
- On a £10,000 withdrawal, £2,500 is tax‑free while £7,500 is taxable, which can mean about £1,500 for basic‑rate taxpayers or £3,000 for higher‑rate taxpayers.
- Lewis advises withdrawing just the tax‑free quarter and placing the balance into income drawdown or an annuity so the taxable portion is taken later when it may be taxed less.
- Coverage notes the cost scales with larger sums, with examples indicating losses can reach around £700 or more when withdrawals are structured poorly.
- He also warns that flexible access can cap future pension contributions qualifying for tax relief, Citizens Advice urges regulated guidance and highlights ill‑health early access, and the minimum access age rises to 57 in April 2028.