Taking money from your pension, in more detail

Two of the routes, and any planned tax-free cash, work the same way. As tax-free cash leaves the untouched part of a pot, the matching taxable remainder moves into the part you draw from. That money stays invested and grows with the pot.

• “A quarter of each withdrawal tax-free” moves no money in advance. Each draw includes its own tax-free share until the allowance is used. After that every draw is taxable, as tax in your plan describes.
• “Tax-free cash first” takes the year’s need from a pension as tax-free cash. Only harvesting, or the tax-free cash running out, makes a draw taxable.
• “All at once” happens pot by pot, in the first year the plan actually draws from that pot. That can be later than your earliest drawing age, and two pots can be crystallised in different years.

Planned tax-free cash is taken before the plan works out what the year needs, from your untouched pots in the order you added them. What the year does not spend is saved the way any surplus is.

On every route, a later taxable draw comes from the part already moved before anything more is crystallised. No pension is drawn before its owner’s “Earliest drawing age”, so a shortfall can arrive while money is still in a pension.