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The UK Pension Withdrawal Limits For Over 60s: 5 Critical Numbers You Must Know For 2025/2026

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Navigating your pension withdrawals after the age of 60 in the UK has become significantly more complex—and potentially more generous—following major legislative changes that took effect in 2024 and continue into the 2025/2026 tax year. The biggest shift is the official removal of the Lifetime Allowance (LTA), which previously capped the total value of your pension pot. This change, alongside the introduction of new limits on tax-free cash and ongoing contributions, means that understanding the latest figures is essential for anyone planning their retirement income today, December 19, 2025.

For those over 60, the good news is that there is generally no maximum limit on the *income* you can take from a modern pension, thanks to the flexibility of Flexi-Access Drawdown (FAD). However, the "limits" you need to be aware of are crucial caps on your tax-free lump sum and, more importantly, your ability to continue paying into your pension once you start taking an income. Getting these figures wrong can result in unexpected and hefty tax bills.

The 5 Essential UK Pension Withdrawal Limits and Allowances (2025/2026)

While the term "withdrawal limit" often implies a cap on the amount of money you can take out, the reality of UK pension rules is that the most significant limits are placed on your tax-free portion and your future contributions. Here are the five most critical figures for the 2025/2026 tax year.

1. The Lump Sum Allowance (LSA): Your New Tax-Free Cash Limit

The Lump Sum Allowance (LSA) is the direct replacement for the tax-free cash element of the abolished Lifetime Allowance (LTA). This is the absolute maximum amount of tax-free cash you can take from all your pensions combined over your lifetime.

  • Standard LSA Figure: £268,275
  • What it Means: For most people who do not hold Lifetime Allowance protections, you can still take up to 25% of your pension pot as a tax-free lump sum (TFLS) or Tax-Free Cash (TFC). The LSA is the maximum monetary cap on this 25% figure.
  • Example: If your pension pot is £1,000,000, 25% is £250,000. Since this is less than the LSA of £268,275, you can take the full £250,000 tax-free. If your pot was £2,000,000, 25% would be £500,000. However, the LSA limits your tax-free cash to £268,275, and the remaining £1,731,725 would be subject to Income Tax upon withdrawal.

2. The Money Purchase Annual Allowance (MPAA): The Contribution Cap After Withdrawal

The Money Purchase Annual Allowance (MPAA) is arguably the most important "limit" to understand once you reach 60 and decide to access your pension flexibly. The MPAA is a reduced Annual Allowance that is triggered the moment you make a flexible withdrawal from your pension pot.

  • MPAA Figure (2025/2026): £10,000
  • What it Means: If you take a flexible income from your pension via Flexi-Access Drawdown (FAD) or an Uncrystallised Funds Pension Lump Sum (UFPLS), your annual limit for tax-relieved contributions into a Defined Contribution (DC) pension scheme drops sharply from the standard Annual Allowance of £60,000 to just £10,000.
  • Crucial Note: The MPAA is designed to prevent "recycling" of pension cash—taking it out tax-free and immediately paying it back in to get a second round of tax relief. If you plan to continue working and contributing to your pension, triggering the MPAA with a flexible withdrawal will severely restrict your future contribution capacity.

3. The Standard Annual Allowance (AA): The Contribution Cap Before Withdrawal

If you are over 60 but have not yet taken any flexible income from your pension, the standard Annual Allowance is the limit on how much you, your employer, and any third party can contribute to your pension pots in a single tax year while still receiving tax relief.

  • Standard AA Figure (2025/2026): £60,000
  • What it Means: As long as you have not triggered the MPAA, you can contribute up to £60,000 or 100% of your relevant UK earnings (whichever is lower) into your pensions.
  • Carry Forward: You can also potentially "carry forward" unused allowance from the three previous tax years, allowing for a much larger contribution in a single year, provided you had a pension in those years.

Understanding the Mechanics of Pension Income Withdrawal

The confusion around "limits" often stems from the different ways you can access your pension pot. For those over 60, you will typically use one of two main methods to take a flexible income, both of which allow you to take the 25% Tax-Free Cash (up to the LSA limit) and then draw down the remainder as taxable income.

Flexi-Access Drawdown (FAD)

FAD is the most common route for flexible retirement income. When you move funds into drawdown, you "crystallise" them, meaning you take your 25% tax-free lump sum upfront (or in stages). The remaining 75% stays invested in a separate drawdown pot, from which you can take an unlimited income.

  • Income Limit: There is no maximum limit on the income you can take from a Flexi-Access Drawdown pot.
  • Taxation: Every pound of income you take from the remaining 75% is added to your other annual income (such as State Pension or salary) and is taxed at your marginal Income Tax rate (20%, 40%, or 45%).
  • MPAA Trigger: Taking an income from FAD triggers the £10,000 MPAA.

Uncrystallised Funds Pension Lump Sum (UFPLS)

UFPLS is an alternative method that allows you to take ad-hoc lump sums directly from your pension pot without moving the funds into a separate drawdown arrangement.

  • Withdrawal Structure: With each UFPLS withdrawal, 25% of the lump sum is tax-free, and the remaining 75% is taxable income.
  • Taxation: The 75% taxable portion is subject to Income Tax at your marginal rate. Be aware that the first withdrawal is often taxed heavily on an emergency tax code, which requires you to reclaim the overpaid tax from HMRC.
  • MPAA Trigger: Taking an UFPLS withdrawal also triggers the £10,000 MPAA.

4. The State Pension Projection (2025/2026)

While not a withdrawal limit in the traditional sense, the State Pension is a crucial factor in determining your overall taxable income and how much you need to withdraw from your private pensions. For those over 60 who are approaching or have reached State Pension age, this figure is vital for retirement planning.

  • Full Flat Rate State Pension (2025/2026 Projection): £230.25 per week, equivalent to £11,973 per year.
  • Tax Implication: The State Pension is a taxable income. It is paid without tax being deducted, meaning you must factor it into your total income when calculating your Income Tax liability for any private pension withdrawals.

5. The Personal Allowance Limit

The Personal Allowance is the amount of income you can earn each year before you start paying Income Tax. For UK retirees, this allowance is critical because it determines how much of your private pension income will be tax-free, even after you have used your 25% tax-free lump sum.

  • Personal Allowance Figure (2025/2026): £12,570 (This figure has been frozen for several years).
  • What it Means: Your State Pension (£11,973 projected for 2025/2026) consumes most of your Personal Allowance. This leaves only a small amount of your allowance remaining before your private pension withdrawals become taxable. For example, if the State Pension is £11,973, you only have £597 of your Personal Allowance left before you hit the 20% basic rate tax band on your private pension income.

Topical Authority Entities & Key Takeaways for Over 60s

Understanding the interplay between these limits is the key to a tax-efficient retirement. The removal of the Lifetime Allowance (LTA) has simplified one area but introduced new complexities with the Lump Sum Allowance (LSA) and the need to manage the Money Purchase Annual Allowance (MPAA). For those over 60, the decision to take even a small flexible withdrawal must be weighed against the restriction of the MPAA, especially if you plan to continue making significant contributions.

Always consider professional financial advice when making decisions about your retirement savings. Key entities and concepts to discuss with your adviser include: Pension Freedoms, Crystallised Funds, Uncrystallised Funds, Flexi-Access Drawdown (FAD), Uncrystallised Funds Pension Lump Sum (UFPLS), Tax-Free Cash (TFC), Marginal Tax Rate, Small Pots Rule, and Inheritance Tax Planning.

The UK Pension Withdrawal Limits for Over 60s: 5 Critical Numbers You Must Know for 2025/2026
uk withdrawal limits for over 60s
uk withdrawal limits for over 60s

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