Lump sum tax implications.

Secret2ndAccount

You take 70k tax free. The whole of the rest of the pot is now taxable, even if it grows. We call it crystallised. Some of it may be taxed at 0% (because of your personal allowance), but it's all taxable.
So, in year 1, you take a further 50k. That's 12570 at 0% and 37430 @ 20%. As you say, 7.5k tax. So you have 113k in the first year. Second year you take 50k again; pay 7.5k tax again. That's a total of 156k after tax.

If you don't need the 113k right away up front, you can withdraw in smaller chunks, e.g:
Take 35k tax free, and 50k-7.5k taxable.
Next year, take 35k tax free, and 50k-7.5k taxable
If the pot were to grow in the time between withdrawals, then the size of the 25% lump sum (on the remaining uncrystallised part) would grow too. If you take the whole 25% right at the beginning, there's no prospect it could get any bigger.

Or you could take each tranche as 25% tax free, 75% taxable. This is where you got the notion that 25% of every withdrawal is tax free. It is if you go this route. This might not work for you as, at some point, it seems you will want to make more tax-free than taxable.

Need to give some thought as to what you should be invested in within this pension. Could convert it all to cash - it would be unfortunate if the stock market fell 20% between now and when you need your deposit...    There are short term cash funds paying over 3.5%, but I don't know what range of investments is open to you from your pension provider.

Andyaero

Am I correct in thinking that by doing this, I then cannot take any more income from the pot until the 3rd year (25/26), as if I do anything I take will be taxed at 40%.

draiggoch

Andyaero said:

Am I correct in thinking that by doing this, I then cannot take any more income from the pot until the 3rd year (25/26), as if I do anything I take will be taxed at 40%.

That’s correct