Anyone good at maths who can help me please?

You should also understand if the dB pension has guaranteed inflation increases, this could protect the income as opposed to you investing and hoping to get a return.

Another factor, do you need the cash to use for holidays, pay off mortgage, gift to children?

What you're proposing is not tax efficient. Your monthly payments will be treated as income and taxed. If you put the payments in savings or an investment fund than that will also be taxed.

The idea behind defined-benefit schemes is that you retire and then live off it. That's why the pot never runs out as it's guaranteed income for life.

If you take it when you retire then you don't have any other income so most or all of the pension falls in your tax free allowance.

I think your 3% return is over generous. Currently the highest rate is 3.8% in the highest paying account. The calculations for inflation significantly reduces this. Interest rates are on a high at the moment but are likely to fluctuate greatly over the next decades.

Is this a dB (defined benefit) pension or dc (defined contribution) ? I suggest you listen to the meaningful money podcast he's got really clear explanations on pensions and investing. He gives out loads of information and says mist people can manage their own money, but he says if anyone should take advice, at retirement (or when planning retirement) is the best time. A good financial planner could really help

If it’s a DB pensions tend there is no pot.

@pensionsums I think you have two threads running.

If you are still working you will pay tax on your monthly pension. It maybe 20% or 40%, that reduces the net pension to save.

I agree you need to do a spreadsheet with all the variables.

Check you can still pay into a pension while withdrawing from another.
Have you factored in that your pension pot will increase in value over the next 10 years and so the 25% tax free amount will also be bigger than currently predicted. So e.g. if you apply the 3% annual growth to your total pension pot how big will it be in 10 years?

One which shows on basic figures when the crossover point is between earlier but smaller payments and later but larger ones.

Are you competent with spreadsheets?
If so then make one and look at info graphically.

Some other scenarios to mull over

Just because you are entitled to take at 25% doesn't mean you have to and doesn't mean you have to in one lump sum.
My parents are taking their 25% out over a couple of years so they can move it straight into ISAs maxing out their entitlement each year.
One option they have looked is only withdrawing the interest the pension pot is making to live off. For their outgoings this should be sufficient and means they still have the pot should their needs change and their outgoings increase - for example one of them needs care.

Be careful with retiring at 55 it can impact your state pension. My mum retired and had to buy years to get close to a full state pension. She had some contributions as part of carers allowance. Check the calculator online and whether your state pension is predicted based on continued employment between 55 and 67 or whenever it can be drawn or not

You might be able to take a lump sum tax free but any income you then earn from it will be taxed at your marginal rate - presumably 40% if you continue working. The monthly payments would also be taxable.

You'd be better off leaving it invested inside the pension wrapper if you can live off your self-employment income and are going to continue working.

Wait and talk to your financial advisor. I think you are misunderstanding the monthly figures. These will either be based on you buying an annuity or taking a drawdown and not planned on "running out". Your 3% assumption is not taking inflation into account.

This. There’s no reason to think your money will grow more outside the pension than inside it (if it looks like it will, that’s because you’re using a calculator with different assumptions or that doesn't take account of inflation) and by taking money out before you need it you reduce what you can take tax free.

Apart from everything else that's already been said, keep in mind that the lump sum is tax free but the monthly amount is taxable. So you won't save the whole £800-odd. If you retire later, the tax free amount will be larger and you may pay less in tax if you wind down your self-employed work. You will also pay tax on your investment returns if not in an Isa. You really need someone to do the numbers properly.

Things you also need to think about are;

Will your monthly pension rise with inflation? Do you have any debts (because it might be better to pay them off, but not necessarily).

Your OP suggests you have a defined contribution private pension, not a public sector one. I assume this because you say your pension will stop at some point. So you need to know about the pros and cons of buying an annuity or not.

Taking cash and investing it yourself is only a good idea if you think you can make a better return than your pension scheme or annuity provider. It can be a burden managing large investments.

So tasks for you are: get clear what type of pension it is and what ALL your options are. Think about debts. Speak to a financial advisor. And don't be naive when dealing with a financial advisor.

How is the pension currently invested? How do those returns compare to investing outside of the pension?
If you are investing out of a pension will you be liable for tax?
What annuity could you buy with your pot?
Is an annuity right for you?
What income do you need to maintain your lifestyle?
When and what state pension will you get and how will that impact what you need to take from your pension?
What are the tax implications of the monthly payments from your pension?
How is your health, are there any factors that would indicate you won't live into your 80s & 90s?

These plus more would be questions I would be asking an financial advisor.

There's no one right answer. It a decision that needs talking through with someone that knows the ins and outs of your pension and situation.

The money in the pension pot will continue to grow (interest) as you are taking stuff out. So the pot will last longer than your calculations suggest.

echo the others who say you need to see a financial adviser

also, why would you be taking money out of your pension pot and then investing rather than spending it? what would you live on?

Of course a pension pot can run out! If you take everything out of it, there's nothing left. If you buy an annuity then that's different, but as OP talks about running out, I assume she's not planning on doing that.