How to take a tax-free lump sum from your pension

James Rowe: Taking a tax-free lump sum from your pension is one way of accessing money in your pot, but there's plenty to consider before doing so. Welcome to Which? Money.

Hello, it's James at home this week, but joining me down the line from the Which? studio is Which? Money's Ruby Flanagan. Ruby, hello.

Ruby Flanagan: Hello.

James Rowe: And AJ Bell's Director of Public Policy, Tom Selby. Tom, hello.

Tom Selby: Hello.

James Rowe: Nice to have you back with us. Ruby, should we kick off with the basics? What do we need to know about taking a lump sum from our pensions? Just the basics.

Ruby Flanagan: Just the basics. So, when you've got your defined-contribution pension pot – so this is the one that you usually have through work, you put the money in, it gets invested and you get back how well those investments go.

Under the current rules, you can take up to 25% of your defined-contribution pension pot tax-free from the age of 55, and this is rising to 57 from April 2028. And that's really it, to be honest. You can take a big chunk out tax-free.

James Rowe: Those were indeed the basics, nice and top-level to begin with. But, Tom, let me bring you in here, because although you can take 25% of your pension tax-free, there is actually an upper limit to it as well, isn't there? I feel like I'm throwing you under the bus because the number is very specific. I wonder if you do actually know it off the top of your head. I'll be impressed if you do.

Tom Selby: Yes, yes. There's a specific lump sum allowance, which was introduced in 2024, which is £268,275.

James Rowe: Impressive, well done.

Tom Selby: So that's a quarter of the old lifetime allowance, which used to exist within pensions and doesn't any more. So you've got two allowances for defined-contribution pensions.

You've got that lump sum allowance, and then you've got a lump sum and death benefits allowance, which is designed to capture any money that's both drawn tax-free in life and also passed on as a lump sum when you die. That lump sum and death benefit allowance is just over £1 million, but the lump sum allowance – which just covers your tax-free cash entitlements and the tax-free cash that you take over the course of your life – is just over £268,000.

James Rowe: So just give us an idea quickly: if you were above that threshold, you don't get any additional allowances? You kind of hit that threshold and that is as much as you can take tax-free, is that right?

Tom Selby: That's as much as you can take tax-free. So if you take any more than that, then you'll be subject to a tax charge on the money.

So you've got that incentive of 25% tax-free, which is one of the key incentives that exists to encourage people to lock up their money, potentially for decades, in a pension. You get tax relief upfront, you pay tax on the money that you take out – on the 75% of the money that you take out – but you've got that additional carrot of up to a quarter of the money being available tax-free up to that limit of £268,000, taxable above that amount.

James Rowe: And obviously, we're then going to start to think about huge sums in pension pots, aren't we, if you are going to be above that threshold? But for the vast majority of us, we're going to be below that threshold, aren't we? So for most of us, nothing to worry about.

Tom Selby: Yeah, for the vast majority at the moment. I guess one thing to say is that that lump sum allowance – so the amount that you can take tax-free – has been frozen, and it's been frozen for a while. So clearly you're talking about a quarter of a million pounds pension pot roughly, which is a significant amount and, as you say, out of the reaches of most people. So most people won't hit up against that limit.

The longer it's frozen, as we've seen with other tax thresholds, the more likely it is that more people will start to push up against it. But you're right, James, for the vast majority of people, they'll be able to take a quarter of the value of their pot, which usually will be below £1m.

Ruby Flanagan: I think on that note, it's also worth noting that over the last few years, it's been a place where a lot of people are thinking that the government are going to touch for tax.

So I think this is really important to highlight: yes, it's been frozen for the last few years; a lot of people couldn't be hitting that top allowance, and for the last few years in particular, a lot of rumours swirled around that tax-free lump sum and whether they were going to drop it or increase it. It was all a bit chaotic, which has meant a lot of people in the last few years have withdrawn their pensions sooner rather than maybe they planned to, just to try and avoid any changes to that.

James Rowe: Yeah, I was reading ahead of last year's Budget, so 2025, 61% of retirees here in the UK who actually rushed to pull tax-free cash from their pensions ahead of the Budget – I guess fearing some sort of change to the tax system – now actually regret it. So that shows that people were maybe a bit too hasty in making these decisions, weren't they?

Ruby Flanagan: It's a very personal thing. Obviously, a part of your retirement planning, your pension planning, you expect it to be at a certain level, and if there's any risk to it changing, that could throw your plans out of whack.

So a lot of people did rush a bit ahead just to make sure that the plans that they had would not be altered too much. But as of now, it's not been touched. It wasn't touched this year. So I think we'll probably have another year to see. Maybe the rumours will swirl around again next year, but we'll see come August or something.

James Rowe: Yeah. Tom, what do we know about the popularity of taking a tax-free lump sum from your pension pot? Is it increasingly popular nowadays?

Tom Selby: So it's always been one of the best-known and most attractive things about pension saving – this ability to take a quarter of it tax-free from age 55, rising to age 57, as you said. We're seeing more people accessing their pensions generally over time, and naturally you would see the amount of tax-free cash going up as a result of that.

But as you said there, actually what we've seen in the last couple of years is a real spike in that activity. Now, absolutely nothing wrong with taking your tax-free cash – you've saved all your life, the rules allow you to take that money, and so you're absolutely within your rights to do that.

I think the challenge that we've seen over the last couple of years – and thankfully ahead of this Budget it wasn't the same, but particularly ahead of the last Budget that Rachel Reeves delivered – was that a combination of fear out there that there was going to be some sort of attack on people's existing tax-free cash rights. So I think the fear was that even if you'd built up a certain amount, that the government would reduce the amount you could take and effectively apply that retrospectively, resulted in a massive surge in people taking tax-free cash.

I think the FCA data suggests somewhere in the region of £23bn of tax-free cash was taken out. That's way above normal levels. So if you look at the normal levels before the general election, it was somewhere in the region of £7-8bn of tax-free cash was taken out across the country.

So really elevated levels of tax-free cash withdrawals, which suggests that rather than people focusing on their long-term goals, they're taking the tax-free cash because they think they need to, because they're not going to have it the day after the Budget. Which clearly isn't an ideal environment when you're: A, there are significant consequences sometimes to taking your tax-free cash, which aren't always in people's best interests; but also, B, we're trying to encourage people to think long-term and to think about how to make their entire pension last throughout retirement.

And if you've got this panicked activity ahead of every Budget, then the challenge is that people might leave themselves worse off financially and struggling to make up for that loss in the rest of their retirement as well.

So it's not a great environment that every 12 months we get towards this guessing game of what will or will not happen to pension tax incentives. And we at AJ Bell have been campaigning for a long time for the government to commit to at least keep those two pillars of saving in a pension stable: so the tax relief you get at the top, and the 25% that you get at the end – to keep those stable, to commit to those, so that people can at least plan with a bit of confidence.

But so far, we haven't had any commitment along those lines from the government. So this year was a much calmer Budget, less leaking, less speculation, which was good, but who knows what we'll get next year or the year after that.

James Rowe: Yeah, I guess people just want a bit of certainty, don't they, when it comes to their pension? Should we talk about the logistics of accessing that lump sum? Ruby, you can obviously, as the name suggests, take that 25% of your pension as a lump sum in one go, but there are other ways around it as well. I wonder if we could kind of go through each one just to explain the different avenues people can go down.

Ruby Flanagan: At the basic level, you can take it as a single lump sum – the full 25% in one taking. So if you had £100,000 in your pension pot, 25% – £25k – you can take that, and that's fine.

You can also do it in stages using phased drawdown, and you can also do it in stages using – this sounds really technical – uncrystallised pension lump sums. So that is 25% of each withdrawal will be tax-free and the rest is taxed as income.

Tom Selby: So I think the one thing to remember is that when you're choosing, when you want to take your tax-free cash, you've got to make a decision about what happens with the rest of your pot – whether it's your entire pot or whether you're just choosing to take tax-free cash from a bit of your pot.

So another horrible bit of jargon is this idea of crystallisation, one of my least favourite bits of jargon. But essentially, what that means is you're choosing what to do with the rest of your pension pot.

So say if you talk about that £100,000 pension pot again: so you decide you're going to take the £25,000 tax-free cash, you need to do something with the other bit. Now, that doesn't mean you have to take any income from it. You can choose to just put that money into what's called drawdown, so that allows you to take a flexible income as and when you want.

But that doesn't actually have to change anything for you as an individual. So you could keep all the same investments if you want to, if you're not planning to take an income for that pot – you might be planning to leave it there for the next 10, 15 years. You might be planning to continue to top up your contributions, and you can do that if you just take your tax-free cash, because what's called the money purchase annual allowance, which reduces the amount you can pay in each year, that only kicks in if you take taxable income flexibly from your pot through drawdown.

So if you just take your tax-free cash, you can actually keep on topping up your pension pot if that's what you want to do. But the key thing is that you need to make a choice about that other bit of your pension pot.

So if you want to keep flexibility, you might go for drawdown. You can choose to go for an annuity, so a guaranteed income for life from an insurance company, or you can go for these horrible uncrystallised funds pension lump sums. So that means you're just taking the taxable bit chunk straight out of the pension scheme and taking the tax-free bit at the same time.

Ruby Flanagan: So it truly is quite chaotic in planning that. So when we were saying people were worried before about this changing, it's because so many different decisions have to be made around that 25% that you're taking.

So of course people were a bit worried and panicked. So just to sort of confirm that yes, people are allowed to be panicked about it, because there's so many other decisions you have to make. It's not as simple as just taking the cash and having fun with it. There is a lot to think about.

Tom Selby: Yeah, I think the first thing people need to think about before they're even getting into any of that stuff is: do I need this tax-free cash? Because certainly if you take all of your tax-free cash out of your pension – so again, go to that £100,000 example, you take £25,000 out – if you're not putting any more in, that's it. You can't take any more tax-free cash out of that pot.

So if the remaining £75,000 grows to £150,000, you can't take an extra bit of tax-free cash out of that £75,000 of investment growth. You've taken your tax-free cash in relation to that pension pot. If you make more contributions, then you can take tax-free cash in relation to those new contributions, but not in relation to the pot that existed previously.

You also need to think about the fact that if you take all of your tax-free cash out, then you're taking it out of an environment where it can potentially grow tax-free – so no capital gains tax within a pension, for example – and you'll be moving it out of there into an environment where it may be taxable.

Now, if you're taking a small amount out, then you might just be able to use your ISA allowance, if that's what you want to do, and get it sheltered from the taxman in that way. But if you're taking out a larger amount, then there's a decent chance that if you haven't got something that you specifically want to spend it on, that you're going to have to put it into a savings account. And we've seen at the latest Budget, actually, that the tax bill for people who are saving in bank accounts is going to go up from April next year.

So I think yes, there's a lot of fear around this, yes, there's a bit of complex jargon, but I think the first thing is to make sure that you have a think about: if you're taking this tax-free cash, certainly if you're taking it at the earliest opportunity, what are you going to do with it?

If you're going to do something sensible – so if you don't have a rainy-day fund, good thing to do. If you want to spend it on things that you want to do in life – so doing up your bathroom, doing up your kitchen, going on holiday – that is your choice.

But make sure you at least think about doing something that you want to do and consider the consequences of what's going to happen there as well. So taking that tax-free cash out means it can't keep growing in your pension, and your pension's going to be lower later in life as well.

So I think it's just making sure that you approach it calmly, thinking about your long-term priorities and with a real clear eye on what you're going to do with the money before you take it out.

James Rowe: So that's probably the first question to ask yourself. I think that's what you're trying to say here, isn't it? If you want to take this lump sum, this tax-free lump sum, what do you actually want to do with it? That's the first question. But I guess the secondary question is: which approach would you actually want to take given the examples we've just talked through? Is there one that's most common, and I guess is there one that's most straightforward as well?

Tom Selby: So most common would be going into drawdown, and I think that's partly because people often, when they're younger, like to retain a bit of flexibility with how much they can take from their pension. So if you go for an annuity, for example, then you're locking into a retirement income for life, and you can't reverse that decision.

So it's quite a big commitment, and for a lot of people – particularly if you're in your early 60s, even late 60s, early 70s, and you're healthy – you might want a bit more flexibility with your money.

So often people will start off by going into drawdown, but they won't, as I said earlier, they won't necessarily take an income from that pot. So often people's prime motivation when they first access their pension is getting their tax-free cash, because it is a big chunk of money for a lot of people, it's something that is an amount of money they won't have had access to before. So often the second bit won't necessarily be thought about at the point that they're taking their tax-free cash.

So again, that's absolutely fine as long as you're thinking – say if you're 55, so you go at the earliest possible opportunity and you take all of your tax-free cash – then you need to look at the rest of your pot, think about when you're going to retire and think: how am I going to make sure that that can last me as long as I'm going to live for in retirement? Which might be into your 80s, might be into your 90s, you might even be lucky enough to live healthy until you're 100.

So there are different ways that people still do buy annuities. Often the first port of call will be drawdown, and then people might decide to buy an annuity later on in life, perhaps when they'll be able to get a slightly better rate – so into their 70s, maybe 75, something like that. But initially, often the first port of call will be to go for drawdown.

James Rowe: Tom, you keep mentioning drawdown, and handily enough we're going to be doing drawdown on the podcast next week. So for anybody who's listening and keeps hearing us talk about pension drawdown, we'll be covering it in full next week, same time. So if you want a bit more detail, just tune in then.

I think it might be worth actually just touching a bit more on taking that tax-free lump sum earlier in life – maybe before you actually get the state pension, for example. A lot of people might take that tax-free lump sum to maybe supplement their income until they hit that state pension age.

Can we just go into a bit more detail about building your pension pot up after you've taken that tax-free lump sum? What are the actual logistics of that? What do you need to bear in mind – any thresholds or allowances or stuff like that?

Tom Selby: Yeah, so when you take just your tax-free cash, the usual allowances you have – so the annual allowance being the main one. So that's the cap that's placed on the amount that you can contribute in a tax-incentivised way to a pension each year.

If you just take your tax-free cash, that stays at £60,000. So you've got the same constraint after taking your tax-free cash as you had before. That's a pretty generous annual allowance: if you're able to pay in £60,000 a year, then you're in a pretty strong position.

Now, the other thing to remember is that the amount that you can contribute is capped at 100% of your earnings as well. So if you're earning £20,000 a year, for example, then that's the maximum you can put into a pension each year: £20,000. Quite difficult for someone who's earning £20,000 to put £20,000 in, but if you've inherited money, for example, then there are ways that that would be possible for people.

So if you just take your tax-free cash, you can keep contributing to a pension in the normal way. If you take even £1 of income through drawdown – so that's the taxable bit of income – or if you take one of these uncrystallised funds pension lump sums where 25% of it is tax-free and the rest is taxable. If you take £1 of taxable income, then your annual allowance reduces from £60,000 to £10,000.

So for anyone who's accessing their pension, perhaps as a bridge and is thinking of: how do I top up my pension after that to get back to where I want to be? Thinking very carefully about: do I want to take anything more than my tax-free cash, I think is really, really important. Because if you want to pay in more than £10,000 a year after accessing your pension, then you need to make sure you haven't touched the taxable bit, because otherwise you'll be constrained to £10,000 a year rather than £60,000 a year.

Ruby Flanagan: I was going to say, this is exactly what my mum has done. So a few years ago she retired, took the tax-free lump sum, paid off loads of debt, settled, sold her business, got that sorted.

She's continuing working now, but because she hasn't taken from drawdown, she's able to continue to contribute and is hoping to, when she does eventually retire, to take it all back. Which I think, in the current plans, she'll probably be more financially stable when she does eventually retire than she is now.

So it's a lot of work and a lot of planning to do it, and God bless my mum; she did sit down, a lot of numbers had to be dealt with, but it is doable. So if you do want to continue working, that is, you can continue contributing to a pot and it building, so when you do want to retire, you might have a little bit more.

Tom Selby: Yeah, I think that's a really important point actually, is that often because there's a lot of terminology that can be quite confusing, there are a lot of options that can be quite off-putting, but actually if you can get your head round some of the basic principles, then you can really use this stuff to your advantage.

So there's lots of people for whom, if they're, say, in your early 60s, your priority might be helping your kids get on the housing ladder, or it might be that you want to go on that holiday of a lifetime. And you can use your tax-free cash to do that, and you can keep on building your pension pot up over time.

So if you're still working, then actually you can kind of have the best of both worlds. You can use that tax-free cash to help someone out who needs that help, and then you can keep on building up your pension to make sure that you're still in the position you want to be in when you finally decide to stop working.

James Rowe: Yeah, I think it's weighing up the pros and cons, isn't it, of taking that lump sum early based off what the pair of you have said. And Ruby, for your mother as well, it's given her a bit more flexibility now, hasn't it, to pay off any debts? 

Or for a lot of people, might want to pay off the mortgage so that in a few years' time once they do retire – if their mortgage sort of spills into retirement – they can almost just forget about it.

I guess there are pros to waiting as well, aren't there?

Ruby Flanagan: Yeah, I think again it's all your personal circumstance and what works for you. So again, this is probably where it's probably best to advise: if you are really unsure about it, you should probably get advice from somewhere.

We've got loads of guides which offer some basic but detailed explainers of what it means, what you can do, but also working out what works best for you: your pension lump sum, your sort of lifestyle, what you want to do.

Do you want it to stay sort of the same? Do you want it to be better? Are you OK with having a little bit, one less holiday a year? Is that what works for you? So because it's so, again, so personal to you, so it's probably best if you are unsure, it's probably best getting some advice on it just so you can make it work best for you.

Tom Selby: Yeah, I think that's a really good way of framing it, because there is, I think often it probably can feel to people like the experts in the pensions industry or whoever are kind of telling people this is the right way to do things, this is the wrong way to do things.

Actually, if the decisions you make are made in a clear-eyed way where you know the consequences of those decisions and you're comfortable with them and you've got a plan to get yourself to retirement, then you should go for it. You should do what feels comfortable to you.

I think the worry is always that people – and as we discussed ahead of the Budget in 2025 – I think the worry is when people aren't thinking about those things long-term. They're panicking and making decisions without then either thinking about what they're going to do with the money they've taken out or what they're going to do to get their pension pot back to where they want it to be in the future.

So I think as long as people are sitting down with the spreadsheets like your mum, and having a think about how to do this stuff and what they want to do with the money later in life, then it is your money ultimately, and you've saved all your life for that money. And if whatever you want to do with that money is, it is absolutely fine.

And I think in the same way as James, you mentioned paying off your mortgage, some people would say, 'Oh actually that's not the most financially sensible thing to do, you could invest the money and do better'. But you speak to financial advisers – I speak to many – and they will often work with clients and actually make the decision to do that, because it's not just about the bang that you get for your buck.

For a lot of people, paying off your mortgage – whether it's with a tax-free lump sum or with other money – is a huge weight off their shoulders emotionally. And I think that's often the bit that's lost in some of the analysis of this stuff, is that actually if you're using that money to make yourself happier in your later life and more comfortable, then that's a great way to use it regardless of the numbers that kind of underpin some of this stuff.

James Rowe: And as you say, it's a very personal choice. It's going to be different for me, for you Tom, for you Ruby, for everybody – it's going to be a very different decision-making process. I guess we should reiterate: you shouldn't just take the tax-free lump sum just for the sake of it.

I guess it can feel quite appealing once you hit that age and you have that option available to you to take this huge chunk of money, but you should have a clear plan of why you want to take it and what you want to do with the money, and not just take it because it is available to you, right?

Tom Selby: Yeah, that's exactly right. And look, you can completely understand the human temptation: whether you've got a large pension pot or a small pension pot, when you're 54 and 364 days old, you don't have this money, and then all of a sudden you hit your 55th birthday and you've got £20,000-£25,000 grand tax-free sat there, it might emotionally feel to some people like you've won the lottery.

But actually what you need to think about is the fact that you've saved diligently for decades to get to that point. And so you'd be doing all that hard work a bit of a disservice if you then just take it all out and shove it in a bank account and get no interest on the money, or send it all up the wall on something that you're not going to get any value out of.

So you've worked really hard to get to that point, so making sure that you think, then, from that point: what am I going to do with this money that I've worked so hard to get? I think is the most important thing for most people.

And then once you go through that process – ideally with a financial adviser if that's what you want to do, if you can afford it – then you should be able to make decisions that work for you and kind of maximise your financial happiness in later life.

Ruby Flanagan: Yeah, not to be a Debbie Downer or sound really boring. You've got to – you do have to think about it. If I had £25,000 in cash that I could just pull, I'd be like: dreaming. 'Oh God, what am I going to spend it on?'

But yeah, you have to be a little bit boring when it comes to it and make some decisions, but yeah, again, that works for you, that's best for you.

James Rowe: Is now a good time to mention the term 'pension recycling'? I guess it might be worth touching on and just explaining what this actually means.

Ruby Flanagan: When we talk about continuing to save into pensions, there are actually rules – it's the term 'pension recycling rules' from HMRC – and they're in place to stop you from reinvesting tax-free cash to gain an extra tax relief on your pension savings.

And under the rules – I believe it's, please correct me if I'm wrong – but you could face a tax charge if the following conditions are met, and it's:

You take a tax-free lump sum over £7,500.

Your pension contributions increase significantly around the time you take the cash.

The increase in contributions is more than 30% of the tax-free cash you took.

But then also, to be classed as pension recycling, HMRC must prove that you intended to do this. So it's all very specific, but it's sort of just to be aware that that is a thing. So even if you thought, 'Oh I'll just put some money back in, I actually didn't need all of my tax-free cash, I'll just put it back,' you can't do that.

Tom Selby: Yeah, the key thing there is it has to be deliberate. So if you – I've been to many kinds of conferences where people have asked me about this, because you can understand if you're not familiar with those rules, you might think this is actually a quick way to make an easy buck: if you just whip all your tax-free cash out, bang it back into a pension, get the tax relief, keep taking your tax-free cash out, then you keep getting that tax relief and the extra money on top of it.

The rules specifically forbid you from doing that. So yes, you can take your tax-free cash out, keep working and then keep contributing into a pension, but if you're deliberately taking your tax-free cash out just to put it back in and take it out and put it back in, then HMRC could come after you for that and could hit you with a penalty.

James Rowe: Tom, I remember when you were on the podcast a couple of weeks ago when we were analysing the Budget speech, and I think we were talking about how the tax system is maybe a bit overly complex. And I wonder if some of the rules and stuff we've talked about today just shine a light on that as well, because on the surface of it, you would think taking a tax-free lump sum from your pension is pretty straightforward, but there are some complexities to it, aren't there?

Tom Selby: I think that's always the case when it comes to pensions and particularly pensions taxation. Actually, the things that most people need to know about are reasonably limited and can be reasonably straightforward. I think the challenge is that on a podcast like this, we want to explain all the different options and all the different potential consequences of those options.

But actually for a lot of people, if the lump sum allowance isn't a concern to you – so if you're not going to take tax-free cash of above £268,000 – you don't really need to worry about that.

If you're not planning to do anything in particular with the money after taking your tax-free cash, you don't really need to worry about uncrystallised funds lump sums or annuities at this point in time. The money goes into drawdown, but you're not actually going to touch that money, so you don't really need to worry too much about that at that point in time as well.

If you're just taking the tax-free cash, then there won't be that impact on your annual allowance, so you won't need to worry about the money purchase annual allowance either.

But you need to inform people about all of these things because it's possible that one or more of them could trip people up – the same with pensions recycling. For most people, actually a lot of this stuff won't really touch them or affect them, but if 5–10% of people it is a concern, then you need to try to kind of explain all these complexities, but still emphasising the fact that actually for the majority, it isn't that difficult a process. There's just a lot of rules that kind of surround it.

James Rowe: Yeah, and indeed if you are in that 5 or 10% of people –

Tom Selby: Really important, yeah.

James Rowe: – it is very important. And we've got plenty more advice guides and that sort of thing on the Which? website. We'll pop some useful links in the show notes. It's how I read up on a lot of it for today's podcast, let me tell you, it was very, very helpful.

I wonder if we should just wrap up then with some final thoughts then – anything we haven't touched on yet or anything you'd just like to reiterate. Ruby, do you want to start?

Ruby Flanagan: I'd probably say just because of the nature of your tax-free lump sum, and I think again just to reiterate that: have a bit of a plan. That's just from my personal experience. I say my personal experience as if I've taken from my lump sum – I'm 29.

But sort of as writing about pensions and tax particularly, just make a bit of a plan for your lump sum. Think of that chunk of mortgage you want to maybe pay off, high-interest debts, do you need an emergency fund to fall back on?

I think having sort of that as part of your pension and retirement planning of what you want to do with your lump sum, that will be really helpful. Yeah, budget in a holiday, that'd be dead lovely. Take yourself away to somewhere dead lovely and dead hot that you've never been to before.

But make yourself a bit of a plan before taking it out, then you've got a plan of action there and you know what you want to do with it, and you're not going to so-called waste it away. So that would be my piece of advice.

Tom Selby: Yeah, I'd say kind of linked to that: just because you can do something doesn't necessarily mean that you should. So I think there will be a temptation for lots of people when they reach 55 – that's going up to 57, but either way, still really young when you consider life expectancy today.

So yes, perfectly reasonable to think about taking your tax-free cash at any point when you can legally do it, but just have a proper sit-down and think about the benefits of doing that. So if you've got something specific you want to do with that money – pay off debts, set up a rainy-day fund, pay off your mortgage, anything like that – then absolutely fine.

But also think about what you might be losing out on in the future. So if you keep that tax-free cash invested over the long term and you hold off accessing it for, say, 10 years, then you might actually have tens of thousands of pounds more tax-free cash to get at that point later in time.

So I think it's, as you say, it's just taking a breath when you reach that point of time when you can get the money, consider whether it's the right thing for you. If it is, then go ahead and do it. Remember that you don't have to take all of your tax-free cash at once. So for lots of people actually, they might just need – maybe you need £5,000 to do something, to help someone, to pay something off. You can just take that bit of tax-free cash and then leave the rest untouched in your pension pot, then that bit that's untouched can continue growing as well.

So it's a kind of continuation of the theme that you set out, Ruby, of: have a plan, think about what you're doing, don't rush to a decision, and definitely don't try to pre-empt the decisions of politicians ahead of Budgets.

I always say to people it's unbelievably tempting to do and I can totally understand it, particularly when we keep hearing dire economic news and all that kind of stuff, but deal with the tax rules as you find them today. Because trying to second-guess what will happen into the future, you might get lucky, but there's every chance that you won't get lucky, and once you take your tax-free cash out, you can't put it back in. So it's a one-and-done decision.

James Rowe: Sound advice. Plenty to consider, and as I say, plenty to read about on the Which? website – there's loads of useful links in the show notes.

But for now, Ruby, thanks very much for your time.

Ruby Flanagan: No, thanks for having me again.

James Rowe: And Tom, thanks again.

Tom Selby: Cheers, thank you.

James Rowe: That brings to an end another podcast from Which? There's loads more for you to read about everything we discussed today – just head to the episode description for more useful everyday advice.

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