Why Did I Pay Tax on my Pension Lump Sum?

Only the first 25% of your pension can be taken as a tax-free lump sum.

If you want to take out more than this as a lump sum, then any surplus will be taxed at your marginal rate of Income Tax.

If you want to take money out of your pension gradually, then the first 25% of each withdrawal you make will be tax-free, and the rest again will be taxed at your marginal Income Tax rate.

This only applies to cash taken after the age of 55. If you liberate funds from your pension before the age of 55 there will likely be a 55% tax charge as an unauthorised withdrawal.