Can you take 25% tax-free cash and transfer the rest?

Yes, you can often take 25% of your pension tax-free and transfer the rest, but it depends on how the cash is taken and what each scheme allows.

Can I take 25% of my pension and transfer the rest?

There are two routes. You can take the tax-free cash from your current pension and then move what is left, or you can transfer first and take the 25% from the new pension. HMRC sets the tax limits; each scheme decides which route it offers.

If you have a defined contribution pension, a Pension Wise appointment costs nothing and walks you through the choices for taking the money; MoneyHelper calls it impartial and government-backed. A few contact details and your age band are all the form on this page needs to book a free call-back, after which an FCA-authorised adviser weighs the two routes with you.

GOV.UK caps tax-free cash at 25% of what a pension has built up and at £268,275 across all your pensions, the lump sum allowance.

Taking the tax-free cash first, then moving the rest

Taking the tax-free cash crystallises the money behind it: HMRC ties the cash to the start of a pension, which can be drawdown income, a lifetime annuity or a scheme pension. In a pot, the rest of what you crystallise goes into drawdown or an annuity at the same time. The cash comes from a proportion of the uncrystallised funds, alongside the part you designate to provide drawdown. So cash first can leave you with two things in the old pension: uncrystallised money you did not touch, and a drawdown fund holding the rest of what you designated. Take the cash on the whole pot and only a drawdown fund is left to transfer.

Each of those moves differently. For the untouched part, the manual says: "If the scheme rules allow, it is possible for only part of a member’s uncrystallised rights to be transferred out as a recognised transfer (subject to the other conditions for a recognised transfer being met)." The Key Features of the Vanguard Personal Pension (November 2025), for example, allow a partial transfer of uncrystallised funds out only if £10,000 stays behind, and no partial transfer of crystallised funds.

The drawdown fund is stricter, since HMRC treats drawdown money as a pension in payment. It says a transfer of only part of a drawdown fund "cannot be a recognised transfer", so the whole fund has to go, into a new arrangement that holds nothing else. The receiving provider must also be willing to accept money that has already started to be used. Our guide to moving a pension that is already in drawdown covers who may and may not.

No second helping comes with the move: "No entitlement to a pension commencement lump sum can arise from the transfer." A further tax-free lump sum is possible only where further uncrystallised funds are designated for drawdown. Which of these steps your own provider would do first, and in what order, is for an adviser to explain at no charge once you ask for the call-back.

Transferring first, then taking the 25% from the new pension

Once a transfer completes, the money sits under the receiving scheme's rules and that scheme becomes responsible for paying your benefits. The tax-free cash is then worked out there: HMRC's basic rule is that 25% of the total value of the pension and lump sum entitlements arising at a particular time may be paid as a pension commencement lump sum. Our guide to transferring a pension step by step explains the process.

The catch is that a transfer can cost you protections. Some older pensions carry scheme-specific lump sum protection, a right built up before 6 April 2006 to tax-free cash above 25%. HMRC says moving benefits to another scheme loses it unless the transfer is a block transfer. A partial transfer can also reduce the protected lump sum left behind, and can affect a protected pension age; see whether a transfer loses a protected pension age. Should your old pension carry either, put the question to the scheme before requesting a transfer. An FCA-authorised adviser can also weigh the protection against your plans, and that conversation starts with this page's form.

How much tax-free cash is there, and does taking it limit anything else?

Our guide to the pension tax-free lump sum explains the £268,275 lump sum allowance in full. GOV.UK says it is used by a pension commencement lump sum, by the 25% tax-free slice of an uncrystallised funds pension lump sum, and by a standalone lump sum. Anything above it is taxed as income.

Taking only the tax-free cash does not cut what you can pay in later; taking income can. HMRC's manual says a money purchase annual allowance trigger event occurs "immediately before the first payment is made from that member flexi-access drawdown fund", and it also occurs when an uncrystallised funds pension lump sum is paid for the first time. In HMRC's worked example, after a £10,000 tax-free lump sum: "Dinta does not have to take any income from her flexi-access drawdown fund, but when she does she will trigger the money purchase annual allowance rules." Our page on the money purchase annual allowance explains what follows.

Defined benefit and public sector pensions work differently

HMRC's manual notes that in some schemes a lump sum can only be given at the expense of part of the scheme pension, by commuting part of it, so the cash may come at the cost of a smaller pension. The FCA says: "The FCA and The Pensions Regulator (TPR) believe it’s in most people’s best interests to keep their DB pension." For a final salary pension, the trustees must check you have had appropriate independent advice, unless regulation 5 of SI 2015/742 (as it reads since 6 April 2018) applies: "The trustees or managers are not required to carry out the check in section 48(1) of the Act if the transfer value of the member’s or survivor’s subsisting rights in respect of safeguarded benefits under the pension scheme is £30,000 or less on the valuation date." See whether to transfer a final salary pension and how final salary pensions work.

The same goes for a scheme pension already being paid: HMRC attaches extra conditions to moving a pension in payment, and moving only part of one counts as an unauthorised payment.

Before you ask for the cash or the transfer

The FCA warns that "Pension scams often involve attractive offers that aim to persuade you to transfer your pension pot (or release funds from it)." Use the FCA's pension scams guidance, and expect your scheme to run its own transfer checks (see the rules on pension transfers).

A transfer that is not a recognised transfer is an unauthorised payment, and HMRC says the member will be liable to tax on the amount transferred; tax on a pension transfer goes into more detail. Put these questions to the old and new provider in writing:

• Will you pay tax-free cash before a transfer, or only when benefits are taken in full?
• Do you allow a partial transfer of uncrystallised funds, and is there a minimum balance?
• Will you accept money that has already gone into drawdown?
• How much lump sum allowance does your record show I have used?
• Does this pension carry any protection that a transfer would affect?

Common questions about tax-free cash and transfers

Do I have to take the 25% at all?

No. HMRC's manual says there is "no requirement to take a pension commencement lump sum", and all the funds in an arrangement can be used to provide a drawdown pension. Our guide to pension drawdown sets out the rest.

Can I take the cash from one pension and transfer a different one?

Yes, if both schemes agree. GOV.UK applies the 25% to any pension, and one you have not drawn on stays uncrystallised, so it can move under the rules above. The £268,275 cap covers them all.

Does money I have not touched keep its 25% when it moves?

Uncrystallised money moves under the receiving scheme's rules, so the new scheme works out the tax-free cash when you take benefits there, within your lump sum allowance. Money already in drawdown gets no new tax-free cash from the move. Our defined contribution options at retirement page lists the choices.

Can I do any of this before age 55?

Not for the tax-free cash, normally. HMRC's minimum pension age is 55 today and 57 from 6 April 2028; a protected pension age or ill health can allow earlier access. See when you can start taking your pension.

Not certain which order is safe with your pots? The form on this page asks just for contact details and your age band, and the call you then get from an FCA-authorised adviser covers each pension without charge.