Why 60 Is a Key Decision Point
Reaching 60 puts you in a strong position when it comes to pension planning. You have already passed the normal minimum pension age of 55 (rising to 57 in 2028), meaning you have full access to your defined contribution pension. At the same time, you are still 6–7 years away from the State Pension age of 66–67, so you need a clear plan for bridging that gap if you stop working.
Compared to someone accessing their pension at 55, you benefit from five additional years of potential investment growth, higher annuity rates, and a shorter period that your private pension needs to cover before the State Pension kicks in. This guide walks through each option and the factors that matter most at this age.
Your Six Main Options
1. Flexi-Access Drawdown
Drawdown remains the most popular choice for people with defined contribution pensions. You take your 25% tax-free lump sum (up to the £268,275 lump sum allowance) and move the rest into a drawdown fund. You then withdraw income as needed while the remaining pot stays invested.
At 60, drawdown works well if you want flexibility, are comfortable with investment risk, and have enough in your pot to sustain withdrawals for 25+ years. A common approach is to withdraw at a sustainable withdrawal rate of around 3.5–4% per year, adjusting once the State Pension begins.
2. Buy an Annuity
Annuity rates at 60 are meaningfully higher than at 55. A healthy 60-year-old might expect around £5,800–£6,500 per year for every £100,000 used to purchase a single-life level annuity. If you have health conditions, an enhanced annuity could pay considerably more.
| Pension Pot | Annual Annuity (Age 60, Level) | Annual Annuity (Age 65, Level) |
|---|---|---|
| £100,000 | £5,800 – £6,500 | £6,800 – £7,500 |
| £200,000 | £11,600 – £13,000 | £13,600 – £15,000 |
| £300,000 | £17,400 – £19,500 | £20,400 – £22,500 |
| £500,000 | £29,000 – £32,500 | £34,000 – £37,500 |
Figures are indicative for 2026 and vary by provider and personal circumstances. Always use the open market option to compare rates.
3. UFPLS (Uncrystallised Funds Pension Lump Sums)
UFPLS lets you take ad-hoc lump sums directly from your pension without formally entering drawdown. Each withdrawal is 25% tax-free and 75% taxable. This suits people who want occasional cash rather than regular income, though it does trigger the money purchase annual allowance.
4. Take Your Tax-Free Cash Only
You can crystallise your pension solely to take the 25% tax-free lump sum and then leave the remaining 75% in drawdown without taking any income. This preserves your pot while giving you access to a lump sum for purposes such as paying off a mortgage or supporting family members.
5. Cash In Your Entire Pension
Withdrawing everything as cash is possible but rarely advisable for large pots. With 75% of the pot taxable as income in a single year, the tax bill can be enormous. If your pot is under £30,000, the small pots rules or trivial commutation may offer a more tax-efficient route.
6. Leave Your Pension Untouched
If you are still working at 60 and have sufficient income, there is no obligation to touch your pension. Leaving it invested allows further growth and keeps your options open. Your pension also remains outside your estate for inheritance tax under current rules, though proposed IHT changes from April 2027 may alter this.
Bridging the Gap to State Pension
If you plan to stop working at 60, you face a gap of 6–7 years before your State Pension begins. During this period, your private pension, savings, and any other income must cover all your living expenses. Careful planning is essential to avoid drawing down too much too quickly.
Options for bridging the gap include:
- Drawdown income – Set a sustainable withdrawal rate that you reduce once the State Pension starts
- ISA savings – Use tax-free ISA income to supplement pension withdrawals. See our ISA bridge strategy guide
- Part-time work – Reducing your hours rather than stopping completely can dramatically reduce the strain on your pension pot
- Partial annuity – Use part of your pot to buy an annuity covering essential expenses, keeping the rest in drawdown for flexibility
Tax Planning at 60
Careful tax planning can save you significant amounts when accessing your pension. Key strategies include:
- Spread withdrawals across tax years – Use your personal allowance (£12,570) and basic rate band each year rather than taking large lump sums
- Use phased crystallisation – Take tax-free cash in instalments rather than all at once
- Coordinate with other income – If your partner has unused personal allowance or basic rate band capacity, consider splitting income sources where possible
- Be aware of the MPAA – Taking taxable income from drawdown triggers the £10,000 money purchase annual allowance, limiting future pension contributions
- Claim Marriage Allowance – If one partner earns under £12,570 and the other is a basic rate taxpayer, transferring 10% of the personal allowance saves £252 per year
What About Your State Pension?
At 60, it is essential to check your State Pension forecast. The full new State Pension for 2026/27 is £230.25 per week (£11,973 per year). If you have fewer than 35 qualifying years of National Insurance, you may want to buy missing NI years before you reach State Pension age.
Remember that the State Pension is taxable income. Combined with private pension withdrawals, it could push you into a higher tax band. Planning your drawdown strategy with the State Pension in mind is crucial.
Death Benefits and Estate Planning
Your pension choices at 60 affect what happens to your money when you die. Key considerations:
- Drawdown funds can be passed to beneficiaries tax-free if you die before 75, or taxed at the beneficiary’s marginal rate if after 75
- Annuities generally stop on death unless you select a joint-life or guaranteed period option
- From April 2027, inherited pension pots may fall within the scope of inheritance tax under proposed government changes
Make sure you have completed an expression of wish form with your pension provider to indicate who should receive your pension benefits.
When to Get Professional Advice
Consider getting regulated financial advice if you have a pension pot above £100,000, hold a defined benefit pension, have complex tax circumstances, or are unsure which combination of options is right for you. An FCA-authorised adviser can model different scenarios and make a personal recommendation.
Everyone with a DC pension is entitled to a free Pension Wise appointment from MoneyHelper. This impartial guidance service explains your options without making recommendations.