Can I Transfer My Pension to a Bank Account?

As people plan their retirement income and consider how to access their savings, one common question arises:

“Can I transfer my pension to a bank account?”

The answer isn’t straightforward. It depends on how and when you’re accessing your pension, and what type of scheme you have.

In this article, we’ll break down the rules around withdrawing pension funds into a bank account, when it’s allowed, how it works, and what to watch out for - especially around tax, timing, and long-term sustainability.

Can You Transfer Your Pension Directly to a Bank Account?

The simple answer is no, you cannot directly transfer your entire pension to a bank account in the same way you might transfer money between savings accounts.

However, once you reach a certain age (currently 55, rising to 57 in 2028), you can begin withdrawing pension funds and paying them into your bank account, subject to rules and tax conditions.

There are a few ways this can happen:

• Taking a 25% tax-free lump sum

• Setting up flexi-access drawdown

• Taking an Uncrystallised Funds Pension Lump Sum (UFPLS)

• Using regular withdrawals or ad hoc lump sums

Let’s look at each in detail.

1. Withdrawing the 25% Tax-Free Lump Sum

Most pension schemes in the UK allow you to take 25% of your pension pot tax-free from age 55. This lump sum can be paid directly into your bank account.

Here’s how it works:

• If your pension is worth £200,000, you can withdraw £50,000 tax-free.

• This amount is not counted as income and won’t affect your tax bracket.

• The remaining 75% stays invested (or can be used to buy an annuity or set up drawdown).

Once taken, that lump sum is yours to use however you like - it can sit in your current account, be invested elsewhere, or be used for major expenses.

Important note: You do not have to take the full 25% at once - you can access it in stages if your provider supports phased drawdown.

2. Flexi-Access Drawdown

After taking your 25% tax-free cash, the rest of your pension pot can stay invested. You can then draw income from it as and when needed. These withdrawals are known as flexi-access drawdown payments.

• Payments can be regular (e.g. monthly income) or irregular (e.g. lump sums).

• Every payment is taxed as income at your marginal rate.

• Payments are made directly into your bank account.

• You control how much you withdraw and when, subject to available funds.

This is one of the most flexible ways to access your pension while keeping the rest invested for potential growth.

3. Uncrystallised Funds Pension Lump Sum (UFPLS)

   
   

An alternative to drawdown is to take one-off lump sums using the UFPLS option. This allows you to withdraw part (or all) of your pension without entering drawdown.

Each withdrawal:

• Pays 25% tax-free

• Taxes the remaining 75% as income

• Is sent directly to your bank account

For example, if you withdraw £20,000:

• £5,000 is tax-free

• £15,000 is added to your taxable income for that year

This is a good option for occasional access to pension funds, but it needs careful planning to avoid pushing yourself into a higher tax bracket.

4. Buying an Annuity (and Receiving Payments into Your Bank)

Instead of drawdown, you can use your pension pot to buy an annuity - a financial product that provides a guaranteed income for life (or a fixed period).

Once in place:

• Your annuity provider pays you regular income (usually monthly)

• These payments are taxed as income

• They are deposited into your bank account just like a salary

While you can’t transfer your pension lump sum into your bank account all at once using an annuity, this method provides stable, predictable payments.

Can You Transfer the Whole Pension to a Bank Account?

Technically, yes, but it’s rarely advisable.

You could, once you reach minimum pension age, withdraw 100% of your pension and have it paid into your bank account. However:

• Only 25% would be tax-free

• The remaining 75% is taxed as income, which could push you into the 40% or 45% tax bracket

• Large withdrawals can result in unnecessary tax bills

• Once it’s in your bank account, that money is no longer protected from inheritance tax (unlike in a pension wrapper)

• You may lose the ability to grow your pension tax-free

This kind of full withdrawal should only be considered with careful tax planning and advice.

How Do Pension Withdrawals Work Logistically?

The process is fairly straightforward once you reach the eligible age:

1. Contact your pension provider and request to access your pension.

2. Choose how you want to access it:

   
   

   • Lump sum

   • Drawdown

   • UFPLS

   • Annuity

   
   

3. Submit relevant forms and ID.

4. Decide where to pay the money - typically, a nominated bank account in your name.

5. The provider processes the withdrawal and transfers funds.

Payments typically arrive in your bank account within 5–10 working days, depending on the provider and whether it’s a new instruction or part of an ongoing income schedule.

Tax Considerations When Moving Pension Funds to Your Bank Account

While transferring pension funds to your bank account is legal and supported by all major providers, there are tax implications:

• The first 25% of your pot is tax-free.

• The remaining 75% is taxed as income.

• Large withdrawals could push you into a higher tax band.

• HMRC may apply an emergency tax code to your first withdrawal, resulting in over-taxation (this can be reclaimed, but causes delays).

• Once you’ve accessed pension income, the Money Purchase Annual Allowance (MPAA) may be triggered, reducing how much you can contribute to pensions in the future (currently £10,000 per year).

Should You Transfer Large Pension Funds to a Bank Account?

In most cases, no. It’s rarely wise to withdraw your full pension pot and hold it in cash for long periods. Doing so can:

• Expose the money to inflation risk (cash loses value over time)

• Reduce your future growth potential (pensions grow tax-free)

• Impact your estate planning (pensions are typically outside your estate for inheritance tax)

• Trigger avoidable income tax liabilities

Instead, consider a staged withdrawal strategy that provides income while keeping most of your savings invested and tax-efficient.

When Might It Make Sense?

There are a few situations where transferring pension funds to your bank account in large sums may be appropriate:

• Paying off a mortgage or other high-interest debt

• Funding a one-off large purchase, such as home renovations or a child’s wedding

• Helping family financially, for example with a deposit

• Health issues, where early access is part of a broader financial plan

In these cases, tax and investment advice are critical to making the most of your funds.

How Belgravia Capital Wealth Management Can Help with Transferring Your Pension

At Belgravia Capital, we help individuals:

• Access their pensions in the most tax-efficient way

• Set up flexible drawdown or lump sum strategies

• Understand the long-term implications of large withdrawals

• Optimise income from pensions, ISAs, and other investments

• Plan legacies and estate distribution effectively

Whether you want to withdraw a lump sum, set up income payments, or build a sustainable drawdown strategy, our advisers ensure that every move supports your broader financial goals.

So, can you transfer your pension to a bank account?

Yes, but not as a one-time, penalty-free lump sum. Instead, UK pension rules allow for structured access:

• Take 25% tax-free

• Withdraw the rest as taxable income

• Set up flexible or regular payments into your bank

Done well, this can support a stable, tax-efficient retirement. Done poorly, it can result in unnecessary tax, lost growth, and a diminished estate.

Before making any pension withdrawals, always understand your options and seek expert advice.

Speak to a Pension Withdrawal Specialist Today

Want help planning your pension withdrawals? At Belgravia Capital Wealth Management, we create tailored, tax-smart retirement strategies built around your income needs and lifestyle goals.

Email us at contact@belgraviacapital.co.uk

Access your pension wisely. Let’s make every pound work for your future.