No. With many defined contribution pensions, you can choose when to take your tax-free cash.

You can usually take up to 25% of your pension tax-free, subject to the Lump Sum Allowance (LSA) and the rules of your pension scheme. The tax treatment of pension withdrawals will depend on your individual circumstances and may change in the future, so it’s worth checking your position before making a decision.

For example, if your pensions are worth £1 million, 25% would be £250,000. That’s below the standard LSA of £268,275.

However, this allowance applies across your pensions. So, if you’ve already taken tax-free cash from another pension, the amount you can still take could be lower. Your pension scheme rules will also affect what is available to you.

You might take the full amount when you first access your pension. Or you may be able to take smaller amounts over several years.

That can be useful if you don’t need all the money straightaway, particularly if you expect your spending to change throughout retirement.

Taking all or a large part of your tax-free cash might suit you if you already have a clear use for it.

You might want to:

• repay your mortgage or other borrowing
• fund home improvements
• buy a new car or motorhome
• pay for travel during the first few years of retirement
• help children or grandchildren financially
• keep a larger cash reserve.

Having less debt as you enter retirement can reduce your regular outgoings. And if you’ve deliberately built your pension to help fund some of the things you want to do once you stop working, using some of the money for those plans could make sense.

Your other resources matter too. Someone with substantial cash savings and ISAs may have less reason to withdraw a large pension lump sum than someone who holds most of their retirement wealth within their pension.

If you take your full tax-free cash without having any plans for it, some of the money could sit in a bank account for years.

Keeping money in cash can be useful for spending you expect in the near future and gives you certainty over how much is available. Over longer periods, however, inflation can reduce its spending power.

Leaving money within your pension means it can remain invested, although investments can fall as well as rise in value.

For some people, simply knowing the money is there is reassuring. But if you don’t expect to use it for several years, it may be worth considering whether you need to withdraw it yet.

With some pensions, yes. You may be able to take part of your available tax-free cash and leave the rest of your pension invested until you need it.

For example, if you have a £1 million pension and £75,000 left on your mortgage, you might choose to take £75,000 tax-free rather than withdrawing the full amount available.

You could then access further tax-free cash later for other spending, such as travel, a new car or helping family.

That can suit people who expect their spending to change over time. You may want more flexibility in the early years of retirement, while keeping money back for whatever comes later.

Leaving more of your pension invested means that money can continue to rise or fall with the markets. Taking the full tax-free amount instead would give you greater access to cash, but may leave more money sitting outside your pension than you currently need.

Your pension provider can confirm which withdrawal options are available under your scheme.

Your pension may be only one of several ways you’re planning to fund your retirement.

You might also have cash savings, ISAs, other investments, earnings from part-time work, a partner’s income or pension, defined benefit pensions and eventually the State Pension.

The timing of when these different sources of income become available can affect how much you need to take from your pension.

You may, for example, have enough savings and ISA investments to cover your spending during the first few years after you stop working. If so, you might decide you don’t need to take all your pension tax-free cash at the same time.

Someone with fewer assets outside their pension could take a different approach.

Looking at everything together can help you plan where your income will come from at different stages of retirement. That can make it easier to spend with confidence, rather than constantly worrying that you’re going to run out.

If you’re planning to retire soon, it’s worth reviewing how your pensions, savings and other income will work together.

Yes, you may be able to access tax-free pension cash while you’re still working, provided you’ve reached the minimum pension age applying to your scheme.

It’s worth considering your pension contributions before you start taking money. Taking tax-free cash on its own doesn’t normally trigger the Money Purchase Annual Allowance (MPAA). However, taking taxable income flexibly from a defined contribution pension can.

If the MPAA applies, it can restrict the amount that can be contributed to defined contribution pensions while still benefiting from tax relief. That could be particularly relevant if you’re still working and either you or your employer is continuing to make pension contributions.

Clearing your mortgage before or during retirement can be appealing. It removes a regular outgoing and may give you greater certainty over how much income you’ll need each month.

For some people, entering retirement without a mortgage also brings a sense of security that matters just as much as the numbers.

But taking pension money to repay your mortgage won’t always be the best option. The interest rate on your mortgage, how much you have outstanding, your other savings and investments and what you plan to do with the rest of your pension will all matter.

For some people, repaying the mortgage will fit comfortably into their retirement plans. Others might prefer to keep more money invested or use savings held elsewhere.

Deciding how much tax-free cash to take isn’t only about tax or investment returns. It’s also about what you want the money to help you do.

A financial planner can help you see how different choices might affect the life you’re planning. That could mean retiring with the mortgage paid off, spending more in the first few years while you’re travelling, helping your family, or simply knowing you have enough set aside to feel comfortable.

Cashflow modelling can then show how those choices could affect your future income and investments, and what happens when other income such as the State Pension or a defined benefit pension begins.

It can also help you test bigger decisions before you make them, so you can see how taking more or less from your pension might affect the years ahead.

At Amber River, this forms part of our Life Landscaping® approach. It starts with the life you want to lead and builds your financial plan around the things you’d like your money to make possible.

You don’t have to take your full tax-free entitlement just because it’s available.

If you already have a clear use for the money, taking some or all of it could fit well with your plans. If you don’t need it yet, you may prefer to leave more invested and access it later.

The amount you take should fit with how you plan to fund the rest of your retirement and what you want that retirement to look like.

Should I take my tax-free pension lump sum?

It depends on what you need the money for and how it fits with your other retirement assets and income. You don’t normally have to take the full amount when you first access your pension.

Do I have to take all my available tax-free cash?

No. Depending on your pension and how you access it, you might be able to take only part of your available tax-free cash and leave the rest until later.

Can I take pension tax-free cash in stages?

Many defined contribution pensions allow tax-free cash to be taken gradually rather than as one lump sum. Your pension provider can confirm the options available to you.

Can I take tax-free cash and leave the rest invested?

Depending on your pension, you may be able to take tax-free cash while leaving the remainder invested. Investments can fall as well as rise in value.

Can I take pension tax-free cash while still working?

Yes, you may be able to access pension tax-free cash while you’re still working, provided you’ve reached the relevant minimum pension age. If you’re continuing to contribute to a pension, it’s worth checking how the way you access your pension could affect future contributions.

Does taking tax-free cash trigger the MPAA?

Taking tax-free cash alone doesn’t normally trigger the Money Purchase Annual Allowance. Taking taxable income flexibly from a defined contribution pension may do so.