Drawing down your pension — the full plan

— Profile matching: 62, £600k pension, £25k other income, £1.4M estate

Live off your ISAs first. Leave the pension alone until 67. Add the charity layer to your will this year.

This is the plan that the comparison landed on. It's a five-year ISA bridge, a five-year pension grace period, and a one-page will change. By age 67 you're roughly £170,000 better off than the next-best option, and your family inherits £250,000 more than the worst.

Why this won, in one paragraph

You have two tax-sheltered pots: your pension (£600k) and your Individual Savings Accounts (your ISAs, plus some cash — assumed at least £100,000). Both are tax-free to live off, but they're sheltered for different reasons. The pension shelters you from both income tax and (until 6 April 2027) Inheritance Tax. The ISA only shelters you from income tax. So the rule is: spend the ISA first (where it only protects you from one tax) and leave the pension last (where it protects you from two). The April 2027 change makes this much more valuable than it used to be — by leaving the pension untouched, you get five more years of double-tax shelter before the rule changes. By 67, your pension has grown from £600k to roughly £835k at 7% annual growth. You then start drawing small phased amounts alongside your State Pension, which fills nearly all of the £12,570 tax-free zone for free.

The five-year calendar — bridge to State Pension Age

Here's what to do, in order. The years assume you turn 62 this year and start the plan in April (the start of a UK tax year).

This month

Update your will to leave at least 10% of your net estate (estate value minus your Inheritance Tax allowances) to a registered UK charity. This single change drops the Inheritance Tax rate on the rest of your estate from 40% to 36% — a saving of £16,000+ on a £400k taxable estate. Use a solicitor; the wording matters (Inheritance Tax Act 1984 Schedule 1A). Cost: roughly £150–£400 for a will update.

Year 1 (age 62)

Withdraw £40,000 from ISA/cash. Zero income tax. Don't touch the pension. Don't take the 25% tax-free lump (yet). Confirm your ISA platform allows partial withdrawals (most do, for free). If you have multiple ISAs, withdraw from the one paying the lowest interest first.

Year 2 (age 63)

Withdraw £40,000 from ISA/cash. Same as Year 1. Pension untouched and growing. Check your State Pension forecast on gov.uk (search "Check your State Pension forecast") — if you have any gap years in National Insurance contributions, you can buy them back now and they'll add to the State Pension you'll receive from 67.

Year 3 (age 64)

Withdraw £40,000. Halfway through the bridge. Review your pension's investment mix — are you taking sensible risk for someone who's going to start drawing in 3 years? Many people are still 100% in equities at this point when they should be moving towards a glide path. Talk to the platform.

Year 4 (age 65)

Withdraw £40,000. One year before State Pension Age. Decide whether you want to take the 25% tax-free lump sum from the pension at 67 in one go (£200k+ depending on growth) or in slices over time. There's no right answer — depends on what you'd do with the cash.

Year 5 (age 66)

Withdraw £40,000. Final ISA-only year. State Pension forecast finalised — at 67 you'll receive £12,547.60/year (2026/27 rate; rises with the triple lock). Apply for State Pension three months before your 67th birthday (gov.uk handles this).

Year 6 (age 67)

The plan changes. State Pension starts. You begin small phased pension withdrawals. The pension is now ~£835k at 7% growth. See the next section for the post-67 plan.

From age 67 onward — phased pension drawdown

Once your State Pension starts, your income mix changes. Here's the year-one math at 67:

State Pension (2026/27 rate)£12,548

Personal Allowance (tax-free)£12,570

Free zone left after State Pension£22

Income target£40,000

Needed from pension drawdown£27,452

To take £27,452 of spendable income from the pension, you'd crystallise about £36,600. The first 25% (£9,150) is tax-free; the other 75% (£27,452) is taxable. Almost all of the £22 free-zone room is consumed by the State Pension, so you'd pay 20% basic-rate tax on the £27,452 = about £5,490 income tax in year 1.

This is the moment the Money Purchase Annual Allowance triggers — but at 67, with no plans to add to a pension again, you probably don't care.

A subtler trick: if your spending genuinely is £40k a year but you have a sudden one-off need (£10k boiler replacement, say), take it as an additional pension drawdown within a single tax year rather than spreading it across two. Spreading pushes you into the next tax year's basic-rate band, paying the same. Concentrating may not. Sonuswealth's tax surface would flag this; an annual adviser conversation might not.

The charity layer, in detail

The will change is the highest-return five-minute decision in this whole plan. The maths is simple:

Your estate£1,400,000

Less: standard allowance (couple)−£650,000

Less: home-to-children allowance (couple)−£350,000

Taxable estate£400,000

Without charity layer — Inheritance Tax at 40%£160,000

With ≥10% charity bequest — Inheritance Tax at 36%£144,000

Charity receives£40,000

Beneficiaries' net position vs no-charity£16,000 better off

If you were already going to give to charity in your will, this is free. If you weren't, you're effectively trading £40,000 to charity for £16,000 less in your kids' inheritance — i.e. you (the estate) "buy" £40k of charity for £24k of family money. Many people are willing to make that trade; some aren't.

There's a second layer to add at the same time: gifts out of your normal expenditure. If your annual income exceeds your annual spending (you're drawing £40k a year and living on less), regular documented gifts to family from the surplus are immediately outside your estate, with no seven-year waiting period. This is the Inheritance Tax Act 1984 section 21 exemption. It requires real bank-statement evidence — set up a monthly standing order to a family member, keep three years of accompanying bank statements that show your income comfortably exceeded your spending. HMRC will ask if your estate is challenged.

The HMRC paperwork you'll need

Form P55 — Flexibly accessed pension payment: repayment claim. Used to reclaim emergency tax on your first taxable pension withdrawal. HMRC's PAYE system often over-taxes the first payment as if it'll repeat monthly. P55 gets the refund within 30 days. Free to file online.
Self-Assessment registration (if not already) if your total income exceeds £50,270 in any tax year, or you have rental income above £2,500/yr, or you want to claim higher-rate tax relief on pension contributions. You can register on gov.uk at any time.
Will update with charity bequest clause. Use a solicitor or a STEP-qualified will writer; not a DIY template — the 10% test is on net estate, which is computed by the executor and is easy to get slightly wrong. £150–£400.
State Pension claim form — file online via gov.uk three months before your 67th birthday. HMRC + DWP will already have your National Insurance record.
Annual record of "gifts out of normal expenditure" — bank statements + a spreadsheet (date, amount, recipient, "from surplus income"). Keep for at least 7 years for the estate's executor.

This-month checklist

Confirm your ISA + cash balance — do you have at least £100,000 between you to cover five years of £40k/year withdrawals?
Get a State Pension forecast at gov.uk (10 minutes).
If there are gap years in your National Insurance record, decide whether to buy them back (Class 3 contributions, ~£907 per year, gives you £329/yr extra State Pension for life).
Book an appointment with a solicitor for the will update with charity bequest clause.
Decide on which UK charities receive the bequest. Verify each is a registered UK charity at register-of-charities.charitycommission.gov.uk.
Open a high-interest savings account for the cash you'll draw from in years 1–5 if your ISA balance alone isn't enough.
Review your pension's investment mix — is it still 100% equities, or has it moved to a sensible pre-retirement glide path?
Set up the surplus-income-gifts standing order if you intend to use the Inheritance Tax Act 1984 section 21 exemption.

What would change this scenario

If your ISA + cash balance is under £100,000: the bridge can't last five years. You'd switch to the phased flexi-access option earlier (probably from age 64 or 65 once the ISA is depleted). Income tax then starts in the bridge years — about £5,054 per year on the £25,270 of taxable drawdown.

If you specifically need the £150,000 lump sum (debt clearance, kids' deposit, care home for a parent): take the 25% lump sum but only for the amount you actually need. £30,000 for a specific purpose is sensible; £150,000 just because you can isn't, because it pulls money out of the pension's Inheritance Tax shelter for no benefit.

If longevity worries you (family history of long life, single income): layer in an annuity at 67 using £150–£200k of the pot. You'd give up some inheritance for guaranteed income for life. Current 2026 rates pay roughly £10,000–£11,000/year on £200,000 for a 67-year-old (single life, no inflation linking).

If you turn out to need £60,000/year not £40,000: the ISA depletes by year 4, not year 5. You'd switch to phased drawdown a year earlier and pay roughly £8,000/year in income tax — still less than Options A or B from day one.

If the Inheritance Tax rate rises above 40% (it's been higher historically — 60% in the 1970s): the charity layer becomes worth more in absolute terms. The ratio doesn't change but the saving grows.

How we know these numbers

Every claim above is grounded in a UK tax rule that's in force as of May 2026.

Personal Allowance £12,570/yr (tax-free) — frozen until April 2031.
Higher-rate threshold £50,270 — anything above is taxed at 40%.
Lump Sum Allowance £268,275 — the lifetime cap on tax-free pension lump sums, in place since April 2024.
Money Purchase Annual Allowance £10,000/yr — triggered by your first taxable pension withdrawal.
State Pension 2026/27: £241.30/week = £12,547.60/year — rises with the triple lock.
State Pension Age phase-in from 66 to 67 between 6 April 2026 and 5 April 2028.
From 6 April 2027, undrawn pensions enter the estate for Inheritance Tax (Finance Act 2026, Royal Assent 18 March 2026). Personal Representatives (executors) are liable.
Post-75 layered tax — beneficiaries pay income tax on inherited pension drawdowns at their marginal rate, on top of Inheritance Tax. Combined rate can reach 67%.
Inheritance Tax rate 40%, reduces to 36% when at least 10% of net estate goes to charity (Inheritance Tax Act 1984 Schedule 1A).
Gifts out of surplus income immediately outside estate, no 7-year wait (Inheritance Tax Act 1984 section 21).
£3,000/year annual gift exemption per donor (Inheritance Tax Act 1984 section 19), £6,000 per couple if you use the previous year's carry-forward.
HMRC P55 form for reclaiming emergency tax on first pension drawdown.

Want this plan run on your actual numbers?

The figures above use the sample profile (62, £600k pension, £25k other income, £1.4M estate). When sonuswealth launches, your personal version will use your real balances, your real income, and your actual State Pension forecast — updated whenever the rules change.

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Information and guidance only. Not regulated financial advice. For your actual situation, run the live generator on the comparison page or speak to an FCA-authorised adviser.

Drawing down your pension.The full plan.