Your pension is there to provide money for your retirement — but that doesn't mean you can't use some of it earlier when you're eligible to do so.
The trade-off is simple:
Money you take from your pension today is money that will no longer be invested for your future retirement.
Suppose you withdraw £10,000.
Your pension doesn't only lose that £10,000.
That money also loses the opportunity to benefit from any future investment growth it might otherwise have received.
Over a long period, that can make the eventual difference to your pension larger than the original withdrawal.
Of course, investment growth isn't guaranteed. Investments can rise or fall in value.
The same principle applies to regular income.
If you set up monthly withdrawals, money is gradually removed from your pension each month.
The higher your monthly withdrawal, the faster your pension will generally be depleted, all else being equal.
Investment performance, charges, the amount withdrawn and how long withdrawals continue will all affect how long your pension lasts.
Depending on the withdrawal options available to you, you may be able to leave money invested and take it gradually.
This could mean taking:
a smaller lump sum now;
occasional withdrawals when you need them;
a regular monthly income; or
a combination of lump sums and regular income.
MoneyHelper provides more information about taking money gradually through pension drawdown:
A pension exists to provide money for retirement, and there are many reasons for taking money from it.
The important question isn't simply:
"Should I withdraw?"
It's:
"What could this withdrawal mean for the money I'll have later?"
A withdrawal calculator lets you experiment without starting a withdrawal.
For example, you could compare:
£5,000 now
with:
£10,000 now
or compare different regular monthly withdrawal amounts.
Where supported by the calculator, you'll see the potential effect on your projected pension and retirement income.
Pension App withdrawal calculator coming soon.
You can change the figures as many times as you like before deciding whether to proceed.
If you decide to make a withdrawal, the withdrawal process will provide further information and risk warnings relevant to your request.
Pension projections are illustrations, not guarantees. Investment values can fall as well as rise, and actual future returns may be different from those assumed.