• Over two-fifths (42%) with a defined contribution pension say they plan to take the full tax-free lump sum in one go, or have already done so, including nearly a quarter (23%) who took, or plan to take this once they retire
  • A fifth (19%) say they will, or have, taken the tax-free cash gradually
  • The lump sum remains a powerful psychological anchor, with more than two in five (44%)1 who are planning to take the cash in one go saying it will mark the start of their retirement journey, while 31% say it will give them greater control
  • Standard Life Centre for the Future of Retirement calls for clearer, timely guidance so people can weigh up immediate goals against longer-term financial security

Tax-free pension cash is acting as a powerful psychological anchor for many over-55s as they approach retirement, according to new research2 from the Standard Life Centre for the Future of Retirement, with two-fifths (42%) saying they either plan to take the full lump sum in one go or have already done so.

The research amongst 55-70-year-olds with defined contribution (DC) pensions finds that, among those planning to take the 25% tax-free lump sum in one go, over two-fifths (44%) say it will mark the start of their retirement journey. A third (32%) say it will give them a sense of financial security and a fifth (21%) say they view it as a separate pot of money entirely.

The research accompanies a new Standard Life Centre for the Future of Retirement report3, which explores the behaviours of people accessing their retirement funds. The findings show the tax-free lump sum is often seen as a tangible reward after a lifetime of saving and reveals many people mentally separate the lump sum from the rest of their pension, treating it as a bonus earmarked for big financial decisions.

Many people prioritise simplifying their finances before retirement, often using the lump sum to reduce debt or pay off a mortgage in order to create a “clean slate”. According to the polling, the majority (90%) of 55-70-year-olds say they want their finances to be as simple as possible before retirement. The research also found that more than two-thirds (68%) feel confident about deciding how and when to take their tax-free cash.

The intended use of tax-free cash varies, but the findings suggest many approach it with a clear purpose in mind. More than a quarter of those who plan to take a lump sum (28%) expect to use it for an expensive treat such as a car or holiday, while the same proportion plan to use it as initial income for day-to-day expenses before they access the rest of their pension. More than one in five (22%) plan to reinvest it elsewhere, and 17% want to reduce their working hours and top up their income with it. Less than one in 10 (9%) say they have no particular use in mind.

Catherine Foot, Director of the Standard Life Centre for the Future of Retirement, said: “The tax-free lump sum is frequently viewed as a reward after many years of saving. The psychology at play is interesting and people typically think of this money as a distinct pot, not necessarily treating it as retirement income. While retirement income decision-making is regularly associated with feelings of uncertainty, when it comes to tax-free cash many people have a clear plan in mind for the money.

“The decision to take a lump sum in full may be right for many, with many using it to secure a regular income, but it also carries the risk of depleting a pension pot too early if not carefully managed. Its influence also exposes the importance of timely, accessible guidance that supports people’s long term financial security, alongside their short-term needs.

“The findings highlight the need for clearer, well-timed and more accessible support to help people understand how and when to use tax-free cash, the trade-offs involved in taking it in full or in stages, and how to balance short-term peace of mind with long-term regular income security.”

-Ends-

Notes to editors:

  1. Of those that plan to take their tax free lump sum in one go
  2. Research conducted for the Standard Life Centre for the Future of Retirement by Opinium Research among 2,000 UK adults aged 55-70 with a DC pension between 5th – 13th February 2026
  3. Standard Life Centre for the Future of Retirement, Decisions in the dark: How the DC pioneer generation are navigating retirement income decisions (January 2026)

About the Standard Life Centre for the Future of Retirement

  • Standard Life Centre for the Future of Retirement is a pioneering UK think tank with a bold ambition to help everyone achieve long-term financial security.
  • How we work, save, and retire is changing, and it will look different for everyone. That traditional idea of spending decades in full-time employment and then retiring with a comfortable, guaranteed income is no longer going to be a reality for most people.  
  • Standard Life Centre for the Future of Retirement uses research to provoke fresh debate, drive action and influence change so that people can secure their financial future and enjoy a decent standard of living in their later lives.
  • It is led by Catherine Foot, a leading research and policy specialist who was appointed as the Director of the think tank under its previous brand, Phoenix Insights, in June 2021.
  • Catherine has over 20 years of experience in the field. From 2015 to 2021, she was Director of Evidence at the Centre for Ageing Better. She has also held senior roles with The King’s Fund and Cancer Research UK.

About Standard Life

  • Standard Life is a retirement specialist focused entirely on retirement saving and income.
  • We are proud to manage around c£317bn in assets on behalf of our 12 million customers, and we champion the belief that everyone's journey to and through retirement can be better. 
  • With our focus entirely on retirement savings and income we want to be the business that people trust to guide their retirement journey, helping our customers achieve better outcomes and greater financial security in later life. 
  • As a FTSE 100-listed group we are using our size, expertise and influence to shape the world our customers will retire into, and are committed to helping three million customers by 2035, take action towards a better retirement. 
  • Standard Life is a responsible investor with a clear commitment to supporting a more sustainable future. The company has achieved its net zero goal across its emissions for 2025 and is working towards net zero investment portfolios by 2050 or sooner.
  • Standard Life is recognised as a leading employer, with long-standing accreditation as a Living Wage Employer, Living Pension Employer and Carer Positive Exemplary Employer and in 2025 became one of Britain’s Most Admired Companies in 2025.

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