How much income can I take?

Pension freedom rules mean there’s now no maximum or minimum limit to the amount of income you can take. In general, you have three options:

  • You can just take your 25% tax-free cash and no income.
  • You can take a limited annual income if you’re in capped drawdown. This limit was initially based on the value of your SIPP and your age on the day the cap was calculated.
  • You can make a significant withdrawal, although this will probably result in you paying a large amount of tax.

Find out more detail about SIPP withdrawals and accessing your pension.

How do I request an income payment from my SIPP?

To request an income payment from your SIPP, log in to your account and go to ‘Manage my pension’, which is under your ‘My account’ menu. From there, select ‘Request income’.

Please make sure you have enough available cash in your account before submitting your request.

Once you’ve requested a one-off income payment, we normally pay this within five working days. We always aim to make payments as quickly as possible.

How will my income be taxed?

Income payments from your SIPP are taxed under PAYE (Pay As You Earn), just like salary or wages. The amount of tax you pay depends on your total income. Taking a larger payment could move you into a higher tax band. You can read more in our pensions and tax guide.

Your first income payment

When you take your first income payment from AJ Bell, HMRC will not have issued us with a tax code for your pension. This means:

  • If we don’t hold a valid current year P45 for you, we’re required by HMRC to deduct tax using an emergency tax code
  • Emergency tax codes often deduct more tax than needed, especially on one-off or larger payments

Using a P45

If you have a current year P45 from a previous employer or pension provider, please send us parts 2 and 3 of the original document. We can accept the original in the post or if an electronic copy was issued to you, we can accept the electronic copy. Please send via email to benefits@ajbell.co.uk.

Please note if we use your P45 to update your tax code, the first payment will still be taxed on a Month 1 (non-cumulative) basis, in line with HMRC rules.

After your first payment

Once your first payment has been made, HMRC will issue AJ Bell with a tax code for your pension. We’ll then use this code for future income payments to ensure the correct amount of tax is deducted.

If you pay too much tax

If too much tax is deducted from your first payment, you can usually reclaim this directly from HMRC rather than waiting until the end of the tax year.