Did you know your pension could give you multiple tax-free payouts? Most people assume it’s a one-time deal. You take 25% tax free and the rest gets taxed. But here’s the surprise – you might be able to do it more than once.

It all depends on how your pensions are set up. If you’ve got more than one pension pot, or the right kind of scheme, you could unlock that 25% benefit multiple times. That means more of your money in your pocket and less going to HMRC.

In this guide, we’ll answer the big question, ‘how many times can you take 25% tax free from your pension?’ - and, more importantly, how can you make the most of it?

The 25% tax-free rule explained

In the UK, the general rule is simple: you can take up to 25% of your pension pot tax free once you reach the minimum retirement age. Right now, that’s age 55 – but it’s rising to 57 from 2028.

This tax-free chunk is usually taken when you start accessing, or crystallising, your pension. Crystallising just means turning your pension savings into retirement income. It can happen when you take a lump sum, start drawing an income, or transfer your pension into drawdown.

There’s a cap on how much you can take tax free across all your pensions: £268,275. That’s 25% of the old lifetime allowance of £1,073,100, which the government has frozen but not scrapped completely.

There are two main ways to take the 25%:

  • Lump sum: You take all of your tax-free amount in one go. Handy if you need cash up front for big plans like paying off debt or helping your kids.
  • Income drawdown: You gradually take money from your pension while leaving the rest invested. You still get 25% of each withdrawal tax free.

Knowing the difference matters, because how you take it affects how many times you can do it.

How multiple 25% withdrawals work in practice

If you’ve built up multiple pension pots or have a scheme that allows flexible access, you might be able to take more than one tax-free lump sum. Here’s how it works.

Separate pension schemes

Had a few jobs over the years? Each employer may have set you up with a different pension. These workplace pensions are usually treated separately, so you can take 25% tax free from each one when you access it.

This also applies to:

  • Personal pensions you’ve set up yourself
  • SIPPs (Self-Invested Personal Pensions) that give more control over investments and withdrawals

With multiple pension pots, each one can trigger its own tax-free allowance when you start drawing from it. The more pots you’ve got, the more flexibility you have.

Phased retirement strategy

You don’t have to take all your pension at once. With phased retirement, you can take a portion of your savings as and when you need it. This can help you:

  • Stretch your retirement income over time
  • Keep more money within lower tax bands
  • Plan withdrawals across different tax years for maximum tax efficiency

It’s a smart way to use your pension drawdown options and reduce your overall tax bill.

Pension splitting strategies

Some pensions let you access only part of your pot at a time, called partial crystallisation. Each time you do, you can take 25% of that portion tax free.

This is common with modern schemes that offer flexible pension access, like SIPPs and many personal pensions. Instead of cashing in a single large lump sum, you draw down smaller amounts when you need them, with each giving you a fresh 25% tax-free chunk.

UK pension types and 25% rules

Not all pensions work the same way. The type of scheme you’ve got will affect how and when you can take your 25% tax-free lump sum and whether you can do it more than once.

Defined contribution pensions

These are the most common and the most flexible. If you’ve got a defined contribution pension, you’ve been building up your own pot of money through workplace contributions, personal payments, or both.
Here’s why they’re ideal for multiple withdrawals:

  • Each pension pot is treated separately
  • You can access them at different times
  • You can take 25% of each pot tax free when you crystallise it

This includes personal pensions, workplace schemes and SIPPs (Self-Invested Personal Pensions). You’ve got full control over when and how you draw from them.

Defined benefit pensions

Also known as final salary schemes, these work differently. Your income in retirement is based on your salary and years of service – not how much you’ve paid in.

That means:

  • There’s less flexibility for multiple 25% withdrawals
  • Some schemes offer a commutation option – a one-off tax-free lump sum in place of part of your pension income
  • If you want more control, you might look at transferring to a defined contribution scheme, but this carries risks and fees, so you’ll need regulated financial advice

State Pension

The State Pension is a separate system and doesn’t offer any tax-free lump sum. It’s regular income paid every four weeks once you reach the qualifying age.

While it’s not included in the 25% rules, it still affects your overall retirement tax planning. If you’re drawing a pension and the State Pension at the same time, you’ll need to manage your total income to avoid jumping into a higher tax bracket.

Young workers and future 25% planning

Thinking about pensions might feel miles away, but if you’re early in your career, the decisions you make now can give you more tax-free options later on.

Why starting multiple pension pots early matters

Every time you join a new employer, you’re likely enrolled into a new pension scheme. Over time, that can build up multiple pension pots and each one could come with its own 25% tax-free allowance.

More pots = more opportunities for tax-free withdrawals later on.

Employer pension vs. personal SIPP strategies

Your workplace pension is a solid starting point. But if you want more control, setting up a SIP (Self-Invested Personal Pension) can give you extra flexibility down the line. With a SIPP:

  • You can make personal contributions alongside your employer pension
  • You choose how it's invested
  • You can time your withdrawals to suit your retirement plan

How job changes create multiple pension opportunities

If you’ve switched jobs a few times, you’ve probably left some pension pots behind. Don’t ignore them – they could be future sources of tax-free lump sums.

You can:

  • Keep them separate to unlock more 25% withdrawals
  • Combine them into one pot (but be careful – this might limit your options)
  • Use each one as part of a phased retirement plan

Planning for rule changes

One key date to remember: from 2028, the minimum pension access age goes up from 55 to 57. That means:

  • If you’re under 50 now, you’ll need to wait a bit longer to access your tax-free cash
  • Planning ahead can help you work around this change and avoid surprises

Tax implications of multiple withdrawals

Taking 25% of each pension pot tax free sounds great, but what about the rest of the money you withdraw?

Here’s what to watch out for when accessing your pension in stages.

How multiple 25% payments affect your tax code

Every time you take money from a pension, HMRC may adjust your tax code. This can lead to:

  • Temporary emergency tax on your withdrawals
  • Under or overpaid tax if your code doesn’t match your actual income
  • A delay in getting back what you’re owed

It’s common for your first withdrawal to be overtaxed, especially if your provider uses a standard tax code. You may need to claim a refund from HMRC later – or RIFT can help sort it for you.

Income tax on remaining pension income

After your 25% tax-free lump sum, the rest of your pension withdrawals count as taxable income. That means:

  • You could pay 20, 40 or even 45% depending on how much you take
  • Taking large amounts in one tax year might push you into a higher band
  • Spreading withdrawals over time can help keep your overall retirement income tax-efficient

National Insurance considerations

If you’re under State Pension age and still working, keep in mind:

  • Pension income is not subject to National Insurance (NI), but your earnings from work still are
  • Taking pension withdrawals while working could bump up your taxable income, so timing matters

National Insurance Calculator

 

Planning withdrawals across tax years

Smart pension planning means thinking in tax years, not calendar years. Try to:

  • Keep your total taxable income below higher-rate thresholds
  • Use your Personal Allowance (£12,570 in most cases) wisely
  • Spread withdrawals to make the most of each year’s tax bands

The right strategy could save you thousands and leave more in your pocket for the long haul.

Common pension tax mistakes

Even small missteps can cost you big when it comes to pensions. Here are some of the most common slip-ups people make and how to avoid them.

Not maximising employer pension contributions

If your employer offers to match your contributions, take full advantage. Otherwise, you’re leaving free money on the table and reducing the size of your future tax-free lump sum.

Emergency tax on pension withdrawals

It’s common for your first withdrawal to be taxed using an emergency code. That can mean a big chunk taken out up front. Many people don’t realise they can claim this tax back – especially if they’re not drawing a full income.

Incorrect tax codes after pension access

Accessing your pension can trigger changes to your tax code. If HMRC gets it wrong, you might end up paying too much or too little tax. It’s worth checking your PAYE code regularly – especially if you’ve got income from different sources.

What to do if you're on the wrong tax code

Missing out on additional rate relief

If you’re a higher or additional rate taxpayer and paying into a personal pension, you could be entitled to more tax relief – but you’ll need to claim it through a Self Assessment tax return. Many people miss this entirely.

Not claiming pension-related work expenses

If you’ve paid into a pension while working and had work-related expenses, you could be due a tax refund. This includes things like:

RIFT specialises in this and we’ve helped thousands of workers claim what they’re owed.

Warning signs you're overpaying tax on pensions

Worried you might be paying too much tax on your pension? Here are some red flags to look out for, and what you can do about them.

Emergency tax applied to pension withdrawals

If your first pension payment looks smaller than expected, check your payslip. A temporary tax code might’ve been used. You don’t have to just accept it. You can often claim that tax back.

Incorrect tax treatment of lump sums

Only 25% of each pension withdrawal should be tax free. If you’ve been taxed on more than that or the full amount, it’s a sign something’s gone wrong.

Not claiming relief on pension contributions

If you’re making personal contributions to a pension, you might be due extra tax relief. Higher earners especially can miss out if they don’t file a Self Assessment.

Professional pension advice costs not claimed

Getting help with your pension can be a smart move, but did you know the cost of certain financial advice can be tax-deductible if arranged through your pension? It’s called adviser charging, and most people don’t realise it exists.

Travel to pension provider meetings

Travel costs to meet with a pension adviser or provider might be tax-deductible in some cases, especially if you’re self-employed or attending on behalf of your work. If you’ve never claimed them, you could be missing out.

Don’t let pension tax complexity cost you thousands

You’ve worked hard for your pension. Understanding the tax rules means you get to keep more of it.

If you’ve taken pension withdrawals and think you might have overpaid tax, or if you’ve never claimed for work expenses that could top up your retirement fund, it’s time to take action.

At RIFT, we’ve helped thousands of people like you claim back what they’re owed. Whether it’s sorting emergency tax, checking your codes or uncovering missed relief, we make it easy.

Find out if you’re due a tax refund with our tax rebate calculator, boost your pension pot and save more for retirement.