SIPP withdrawal rules explained
From early withdrawal rules to tax implications, get your questions on SIPP withdrawal rules explained.
As the thought bubble bouncing over your head flashes with images of your future retirement, whatever that may look like, you may think about exploring different pension options.
For some, having a new State Pension and a workplace pension may be one way to bounce towards retirement. For others, it’s having a Self-Invested Personal Pension (SIPP).
Various pensions work in different ways. Your savings in a SIPP are invested to help them grow, but remember that their value can go down as well as up and you may get back less than what is paid in. Withdrawal rules also differ between pensions and trying to figure them out may feel like your bubble is bursting. But knowing the facts and figures may help you glide towards retirement a bit smoother.
The rules around pensions may seem tricky,” says Alistair McQueen Head of Savings and Retirement at Aviva, “so it’s important to be well informed before making any investment decisions. But preparing for your retirement, no matter your age, is a positive step. When searching for a Self-Invested Personal Pension (SIPP) that could help meet your retirement lifestyle goals, you may look for flexible withdrawals, a range of investments that match your risk comfort level, and being able to manage it easily. Becoming familiar with the tax relief and allowances on SIPPs can also help guide you towards a more financially secure future.
When am I allowed to withdraw from my SIPP?
You can withdraw your SIPP benefits anytime from age 55 (or 57 from April 2028). This is known as your Normal Minimum Pension Age (NMPA), and you may come across this term in your SIPP documents. Footnote [1]
Unlike the State Pension, which you’ll have to wait until you’re 66 to claim (or 67 starting between 2026 and 2028), Footnote [2] you don’t need to wait until the state pension age to withdraw from your SIPP. For many SIPPs the NMPA (currently 55) is due to increase in 2028 to 57, so by 2028 the NMPA will remain 10 years below the State Pension Age (SPA). You should check your SIPPs' terms and conditions to see if this change applies to your SIPP.
To find out more, check out our article on income or pension drawdown.
Can I withdraw money from my SIPP early?
If a company, adviser or promotional advert says it can arrange for you to take your pension before age 55 (the NMPA), it's probably a scam.
But there are a few exceptions.
Can I withdraw from a SIPP before 55?
If you’re suffering from severe healthproblems, like an illness that stops you from doing your job or being told you have less than a year to live, you may be able to access your SIPP early.
In some cases, a protected pension age may allow people to withdraw from their SIPP before reaching 55. Footnote [3] In this case, you’d usually need to have a specific type of job or career, like a professional sportsperson, and the agreement would’ve needed to be made before April 2006.
Any payments made before NMPA, which are not justified by ill-health or a valid protected pension age, are not authorised. You would face a tax charge of 40% or 55% on those payments, depending on the circumstances. The scheme may also take the charge it has to pay from your pension pot, if you claim a payment which is unauthorised. That tax charge can be 15% or 40%, depending on the circumstances.
Do you pay tax on SIPP withdrawals?
You can normally take up to 25% of the value you take out of a money purchase "accumulation pot" tax-free. Your accumulation pot is where your pension contributions are held until you decide what to do with them.
There is a limit called the Lump Sum Allowance. This applies to the overall value of benefits you receive tax-free from your pensions during your lifetime. For 2024/25 the allowance limit is £268,275. You may have a higher limit if you have one of the forms of lifetime allowance protection, as confirmed by HMRC.
When you take any money out of a money purchase accumulation pot, 75% of the amount is used to provide taxable benefits. You can take the taxable amount separately from the tax-free lump sum, either to buy an annuity or by putting it into income drawdown. Alternatively, It can be part of a lump sum payment, also known as an UFPLS, which you take along with the tax-free part. Whichever way you choose, it is not possible to take a tax-free lump sum without providing for a taxable element worth three times the amount of the tax-free lump sum.
There is also a limit on the total tax-free benefits which can be paid from your pensions both during your lifetime and on your death. This is called the Lump Sum and Death Benefit Allowance. For 2024/25 this is £1,073,100. UK income tax is payable by your beneficiaries on any lump sum paid above that limit. You may have a higher limit if you have one of the forms of lifetime allowance protection, as confirmed by HMRC.
Tax rules can be complex and are subject to your individual circumstances. They can also change over time.
Please talk to a financial adviser if you are not sure - you may have to pay for their services. If you don't have a financial adviser, you can find one near you at unbiased.co.uk.
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