Can You Still Pay Into a Pension After Taking Your Tax-Free Cash?
Yes, and usually with your full £60,000 annual allowance intact. Taking only the tax-free lump sum is not "flexible access", so it doesn't trigger the £10,000 money purchase annual allowance. The two things to watch are the first taxable withdrawal, which does, and HMRC's recycling rule, which stops you using tax-free cash to fund extra contributions on purpose.
Taking only your tax-free cash (a pension commencement lump sum) is not one of HMRC's MPAA trigger events 1, so you keep the £60,000 annual allowance and can carry on paying in with tax relief while you are under 75 and have earnings. The MPAA of £10,000 2 starts when you take your first drawdown income or an UFPLS lump sum 1. Separately, if you deliberately use tax-free cash of more than £7,500 to pay significantly more into a pension, the recycling rule can turn the lump sum into an unauthorised payment taxed at 40% or more 34.
- Moving money into drawdown and taking only the tax-free part does not trigger the MPAA; the first income payment does. 1
- A lifetime annuity that can't go down doesn't trigger it either. 1
- Tax-free cash is capped over your lifetime by the £268,275 lump sum allowance, unless you have a protection. 2
- Recycling only applies if it was pre-planned, the lump sums exceed £7,500 in 12 months and extra contributions exceed 30% of the lump sum. 3
- The normal minimum pension age rises from 55 to 57 on 6 April 2028. 6
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What triggers the £10,000 MPAA, and what doesn't
| What you take | Triggers the MPAA? |
|---|---|
| Tax-free cash only, rest moved into drawdown with no income taken | No |
| First income payment from flexi-access drawdown | Yes |
| Uncrystallised funds pension lump sum (UFPLS) | Yes, on the first payment |
| Lifetime annuity whose income can go down | Yes |
| Level or rising lifetime annuity | No |
| Defined benefit scheme pension | No |
Source: HMRC's list of trigger events 1. Designating funds into drawdown is not itself a trigger: "a trigger event occurs immediately before the first payment" of income from the fund 1. Once triggered, the MPAA applies to defined contribution savings for good, and carry forward can't increase it. Our MPAA guide covers the detail.
The recycling rule
Recycling means taking tax-free cash and using it, directly or indirectly, to pay more into a pension so you get tax relief a second time. HMRC's rule applies only when all of these are true 3:
- You receive a pension commencement lump sum (tax-free cash).
- Because of it, contributions to a registered pension (by you or someone else, such as your employer) are significantly greater than they would otherwise have been.
- The recycling was pre-planned.
- The lump sum, plus any other such lump sums in the previous 12 months, is more than £7,500.
- The additional contributions add up to more than 30% of the lump sum.
HMRC looks at contributions over five tax years: the year of the lump sum, the two before and the two after 5. As a guide, HMRC accepts there is no significant increase unless the extra contributions are more than 30% of what would otherwise have been expected 5. Routine increases, such as a pay rise feeding through to a percentage contribution, don't count.
If the rule applies, the lump sum is treated as an unauthorised member payment 4. The unauthorised payments charge is 40%, with a 15% surcharge in some cases 7, and the scheme can face a scheme sanction charge 4.
Worked example
Linda is 60, still works and earns £50,000. She moves her £160,000 pot into drawdown and takes £40,000 tax-free, but no income. She has been paying £5,000 a year gross into her workplace pension.
| What Linda does next | Result |
|---|---|
| Carries on paying £5,000 a year | Fine. No MPAA, no recycling: contributions haven't changed. |
| Takes £2,000 of drawdown income a year later | MPAA triggered: future defined contribution saving capped at £10,000 a year. |
| Plans in advance to pay an extra £15,000 a year for two years, funded by the £40,000 | Extra £30,000 is more than 30% of £40,000 (£12,000) and it was pre-planned: recycling. The £40,000 becomes an unauthorised payment; a 40% charge is £16,000. |
The 25% figure is the normal limit for tax-free cash from a defined contribution pot, and £40,000 is a quarter of £160,000. Lifetime tax-free cash is also capped by the £268,275 lump sum allowance 2.
Checklist before you take tax-free cash
- Will you want to pay in more than £10,000 a year again, including employer contributions? If so, take only tax-free cash for now and avoid any taxable withdrawal.
- Are you planning a bigger contribution? If the money for it comes from the lump sum and it was planned that way, check the recycling conditions first.
- Do you still have earnings? Tax relief on your own contributions is limited to your relevant UK earnings (or £3,600), and stops at 75.
- Check your age. From 6 April 2028 you generally can't take benefits before 57 unless you have a protected lower pension age 6.
Frequently asked questions
Can I still pay into a pension after taking my tax-free lump sum?
Yes. Taking only the tax-free lump sum does not trigger the money purchase annual allowance, so you keep the £60,000 annual allowance. You still need earnings for tax relief on your own contributions, and relief stops at 75.
Does taking 25% tax-free cash trigger the MPAA?
No. The MPAA is triggered by the first drawdown income payment, an uncrystallised funds pension lump sum, or a lifetime annuity whose income can go down. Moving money into drawdown and taking only the tax-free cash is not a trigger.
What is pension recycling?
Using tax-free cash to pay significantly more into a pension, as a pre-planned arrangement. If the lump sums exceed £7,500 in 12 months and the extra contributions exceed 30% of the lump sum, the lump sum is treated as an unauthorised payment.
What is the tax charge if the recycling rule applies?
The unauthorised payments charge is 40% of the lump sum, with a further 15% surcharge in some cases, and the scheme may face a scheme sanction charge.
Can I keep paying my normal workplace contributions after taking tax-free cash?
Yes. Carrying on with the contributions you would have made anyway is not recycling, because contributions have not increased because of the lump sum.
How much tax-free cash can I take?
Normally 25% of the amount you take from or move into drawdown in a defined contribution pot, capped over your lifetime by the £268,275 lump sum allowance unless you have a protection.
Related: money purchase annual allowance · annual allowance 2026/27 · SIPP tax relief calculator
Sources & references
- PTM056520: money purchase annual allowance trigger events — HMRC Pensions Tax Manual
- Pension schemes rates and allowances — HMRC (GOV.UK)
- PTM133810: recycling lump sums, when the rule applies — HMRC Pensions Tax Manual
- PTM133840: recycling, deemed unauthorised payment — HMRC Pensions Tax Manual
- PTM133830: recycling, significant increase in contributions — HMRC Pensions Tax Manual
- Increasing normal minimum pension age — HM Treasury policy paper (GOV.UK)
- PTM134100: unauthorised payments charge and surcharge — HMRC Pensions Tax Manual
Every headline figure above is checked against the official GOV.UK / HMRC guidance listed here for the 2026/27 tax year. Links open on GOV.UK.
Disclaimer: General information for the 2026/27 tax year, not financial advice. Decisions about taking pension benefits are hard to reverse; consider regulated advice before a large withdrawal or contribution.