The Short Answer: Yes, You Absolutely Can
There is no rule in the UK that says you must stop working to access your pension. From the current minimum pension age of 55 (rising to 57 in April 2028), you have the right to draw from your defined contribution pension regardless of whether you are employed full-time, part-time, or self-employed.
What matters is understanding how pension withdrawals interact with your employment income for tax purposes, and how taking pension income can affect your ability to make future pension contributions.
How Pension Income Is Taxed Alongside a Salary
When you take taxable income from your pension (anything beyond the 25% tax-free element), it is added to your other income for the tax year. HMRC treats pension withdrawals as earned income, meaning your combined total determines your tax band.
| Income Band (2026/27) | Tax Rate | Threshold |
|---|---|---|
| Personal allowance | 0% | Up to £12,570 |
| Basic rate | 20% | £12,571 – £50,270 |
| Higher rate | 40% | £50,271 – £125,140 |
| Additional rate | 45% | Over £125,140 |
For example, if you earn £40,000 from your job and take £20,000 in taxable pension income, your combined taxable income is £60,000. This means £9,730 of your pension withdrawal falls into the higher rate band and is taxed at 40% rather than 20%.
The Money Purchase Annual Allowance (MPAA)
This is one of the most important rules to understand if you plan to take pension income while still working. Once you take taxable income from a defined contribution pension (beyond the 25% tax-free lump sum), the money purchase annual allowance is triggered.
The MPAA reduces your annual allowance for defined contribution pension contributions from £60,000 to just £10,000. This includes both your contributions and your employer’s contributions. If you are still in a workplace pension scheme where you and your employer together contribute more than £10,000 per year, triggering the MPAA could be costly.
Actions That Trigger the MPAA
- Taking taxable income from flexi-access drawdown
- Taking an uncrystallised funds pension lump sum (UFPLS)
- Cashing in your entire pension pot
- Receiving income from a flexible annuity
Actions That Do NOT Trigger the MPAA
- Taking only the 25% tax-free lump sum
- Buying a lifetime annuity (standard, not flexible)
- Taking a small pots payment (pots under £10,000)
- Receiving a defined benefit pension
Strategies for Minimising Tax
If you want to access your pension at 55 while still working, consider these approaches to keep your tax bill manageable:
- Take only tax-free cash – Crystallise your pension to access the 25% lump sum without taking taxable income. This avoids triggering the MPAA and adds nothing to your taxable income
- Withdraw in low-income years – If you reduce your working hours or take a career break, use that lower-income year to make pension withdrawals at a lower tax rate
- Spread withdrawals across tax years – Rather than taking a large lump sum, draw smaller amounts each year to stay within the basic rate band
- Use your partner’s allowances – If your spouse or civil partner has unused personal allowance or basic rate band, consider whether redirecting income sources can reduce your household tax bill
- Consider salary sacrifice – If your employer offers salary sacrifice for pension contributions, this reduces your taxable salary and can help offset pension withdrawals from other schemes
Impact on Your Workplace Pension
Accessing a separate personal pension does not automatically affect your workplace pension. Your employer must continue auto-enrolment contributions regardless of what you do with other pension pots. However, if you trigger the MPAA, you need to be aware that the combined total of all DC contributions across all your schemes must not exceed £10,000.
For many higher earners, employer and employee contributions to a workplace pension alone can exceed £10,000. If that is your situation, you may need to opt out of additional voluntary contributions or adjust your contribution level to avoid a tax charge.
Practical Example: Taking Pension at 55 While Earning £45,000
| Scenario | Tax-Free Cash | Taxable Withdrawal | Total Tax on Pension |
|---|---|---|---|
| Take £25,000 TFC only | £25,000 | £0 | £0 |
| Take £25,000 TFC + £5,000 income | £25,000 | £5,000 | £1,000 (basic rate) |
| Take £25,000 TFC + £15,000 income | £25,000 | £15,000 | £4,892 (mixed rate) |
| Cash in £100,000 pot entirely | £25,000 | £75,000 | £26,892 |
This example assumes a salary of £45,000 and no other income. The tax shown is the additional tax on pension withdrawals only. Actual figures depend on your full tax position.
What About Defined Benefit Pensions?
If you have a defined benefit (final salary or career average) pension, different rules apply. Many DB schemes allow you to take benefits from age 55, but your pension will be reduced for early payment. Taking a DB pension does not trigger the MPAA (unless you take income from a connected drawdown arrangement), and you can continue working for the same employer in most cases.
However, if you are considering transferring a DB pension to a DC scheme to access it flexibly, FCA rules require you to take regulated advice for transfers over £30,000.
The 2028 Age Change: Plan Ahead
The normal minimum pension age is rising from 55 to 57 on 6 April 2028. If you are currently under 55 and planning to access your pension while continuing to work, check whether you will reach 55 before or after this date. If you turn 55 after April 2028, you will need to wait until 57 unless your scheme has a protected pension age.