Can I withdraw my pension before turning 55?

Accessing your pension before the age of 55 is subject to strict rules in the UK. For most people, you cannot normally access your pension until you reach the minimum pension age, but there are some exceptions that may allow you to take your money earlier.

Withdrawing money from your pension before you are ready to retire can also have important tax implications and may affect your long-term retirement income. In this article, we explain the current rules around accessing your pension early, the circumstances in which you may be able to withdraw money before the normal minimum pension age, and how pension withdrawals are taxed.

Please note that Moneyfarm does not offer this service. While we strive to provide comprehensive retirement planning services, facilitating early withdrawals from pensions is outside the scope of our services.

Is it possible to take your pension before 55?

The earliest you can take money from your private or workplace pension is 55 (due to change to 57 from 2028) unless there are specific exceptional circumstances.

Pensions are specifically created as a long term investment vehicle, allowing you to save towards retirement, with additional top-up contributions from the government, meaning your investments are boosted by 25% (or more if you pay a higher rate of tax). These tax-efficient wrappers mean you will have more than just the state pension to live on when you choose to stop working. 

The State Pension is not available until you reach State Pension age, which is currently 66 but will rise to 67 in 2028. Modern private pensions allow you to access your money from the age of 55 allowing you to retire earlier should you wish to. If you like the idea of an early retirement, read our article to find out how to retire at 55.

The caveat here is that there are still older pensions that may have specific guarantees or benefits that apply from a specific point in time, and defined benefit schemes (also known as final salary schemes) which have their own specific rules.

When can you access your pension?

The age at which you can access your pension depends on the type of pension you have. The table below gives a simple overview based on your year of birth.

Can you take money out of your pension before 55 if it’s a private scheme? – In a nutshell, no. There are exceptional circumstances where you may be able to access your pension before you’re 55, due to very ill health, or when life expectancy is under 12 months, but these are exceptions and it will still be up to the pension provider to approve any requests. 

Withdrawing from your pension pot before 55 isn’t illegal, but you will have to pay tax of up to 55% on the amount you take out. You may see or be contacted by unregulated companies that will offer to help you access your pension before the age of 55. These companies are most likely to be pension scams and you risk losing all or most of your pension savings rather than getting hold of your money early. Remember, if it sounds too good to be true it most likely is. A regulated pension provider will not allow you to withdraw your pension before you reach the set age.

When can you access your pension before 55?

There are only two exceptions that allow early access to your pension before the age of 55:

1. Ill health

You may be able to access your pension early if you’re seriously ill and unable to work, or if you’re under 55 and have a terminal illness with less than a year to live.

2. Protected Retirement Age (PRA)

A Protected Retirement Age typically applies to certain professions where early retirement is the norm, such as professional athletes or members of the armed forces. To qualify, the PRA must have been granted before 6 April 2006.

Keep in mind that if you transfer a pension with a PRA to a new provider, the protection might no longer apply. If you don’t have a PRA, you’ll need to wait until the normal minimum pension age — currently 55, increasing to 57 in 2028 — to access your funds.

These exceptions are also explained by the UK Government in its guidance on early retirement and personal and workplace pensions. Here the main circumstances:

Can I cash frozen pensions from old employers?

If you have changed jobs several times, you may have built up several workplace pension pots with different employers.

Under the UK’s Automatic Enrolment rules, introduced under the Pensions Act 2008, eligible employees are normally enrolled into a workplace pension by their employer. The main characteristics are:

• Age: you are normally eligible if you are aged between 22 and State Pension age.
• Earnings: you must currently earn at least £10,000 a year.
• Employer contributions: your employer must contribute to your workplace pension. You can also contribute.
• When you leave your job: your pension normally remains invested in the scheme and you cannot usually cash it in straight away.
• Accessing the pension: you can normally access your pension from age 55, rising to 57 from 6 April 2028, unless an exception applies.

Transferring a pension

The more pensions you have, the more difficult it is to keep track of them, so you might want to think about a pension transfer. So you should find all your pension accounts.If you have lost track of any of your pensions, you can try using the government’s pension tracing service. If you can find what you’re looking for, check whether the pension in question is a defined benefit or contribution pension before attempting to transfer anything.

• If it is a defined contribution scheme, it may have unique benefits, so do your research before you act or seek professional financial advice.
• If you are going to transfer pensions to consolidate your pensions, you’ll find some helpful advice on the Gov.UK

If you have several old pension pots, Moneyfarm’s pension consolidation service can help you bring them together in one place, making it easier to keep track of your savings, fees and investment performance. Moneyfarm can handle the transfer process and contact your existing providers for you.

But remember that before asking yourself about withdrawing money from your pension, you need to review your retirement planning. Taking money out of pension funds early will significantly affect the amount you will be due when you retire.

Withdrawing money from your pension at 55

Once you reach the normal minimum pension age, you can usually start taking money from your private or workplace pension. In most cases, you can take up to 25% of your pension pot tax-free, subject to the relevant rules and allowances. You should consider that in 2026 the standard Lump Sum Allowance is £268,275 across all your pension schemes.

You can also choose to take more than 25%, but the remaining amount will generally be subject to Income Tax. The amount you pay depends on your total taxable income and your applicable tax band. If you decide to access your pension, you should contact your pension provider first. They can explain the options available to you and provide the forms or information you need to make a withdrawal.

If you are ready to access your pension, there are a few key steps to follow:

• Check that you can access your pension: make sure you have reached the normal minimum pension age or qualify for an exception.
• Check your pension options: contact your pension provider to find out how much you have saved and what withdrawal options are available.
• Decide how much you want to take: you can usually take up to 25% of your pension as a tax-free lump sum, subject to the applicable allowances. The rest will normally be subject to Income Tax.
• Ask your provider: the pension provider will explain the process.
• Review your remaining pension: taking money out earlier can leave you with less to fund your retirement, so consider how the withdrawal may affect your long-term income.

Continuing to work while drawing your pension

Taking 25% of your personal pension as cash from your pension when you turn 55 is only an option, it is not obligatory. If you are reasonably well off, you can defer the age you receive a private pension, and some people do. The choices open to you are:

• Withdraw a part lump sum and leave the balance where it is.
• Turn your pension savings into an annuity
• Continue to work and leave your pension untouched

So you can continue to work while drawing your pension fund? Is it even possible? The answer is, yes, you can. It is wholly possible, and many people do so. There is no longer a defined default date when you are expected to retire. It is down to the individual, the companies and their business ethics and practices. So you can continue to work after you’ve reached the state pension age if you wish and your company agrees.

You can cash out a pension or receive your state and private pension while you continue to work, but there are advantages and disadvantages.

Dealing with a pension deficit

What to do if you have a pension deficit? As far as your state pension is concerned, in order to receive your full pension, you must have paid sufficient National Insurance contributions. You might have a pension shortfall if there are gaps in your contributions over the years. You can check your state pension status by using the government NI record checker

You can make up the shortfall if you so wish and the government NI checker will tell you how much shortfall you owe for each year that is not full. Be aware though, there are limits as to how far back you can go to top up. Knowing how much you will need in your pension for your retirement years is difficult to predict, but plenty of helpful advice is available. You can read this article on 5 practical ways to take control of your pension.

How taking your pension early could affect your retirement

It’s important to consider the long-term implications: while it may seem appealing in the short term, early pension withdrawal can significantly reduce your pension amount in the future, potentially leaving you with insufficient funds to live on during retirement.

The early withdrawal of pension funds, often referred to as a pension drawdown, means you start dipping into your pension pot before retirement. It’s like opening the oven before your cake is fully baked, and the result is a lot less appetising. The more money you take out of your pension pot now, the less you will have when you retire. Compound interest plays a crucial role here – the longer your money is invested, the more opportunity it has to grow.

Another point to note is that if you’re considering cashing in small pension pots this could drain your pension resources quicker than you expect. These small pots might seem insignificant now, but they can add up to a considerable sum by the time you hit your retirement age. You may want to consider different options, like consolidating these small pots into a single pension pot to maximise the benefits.

You can find comprehensive insights into how to retire early in the UK. Finally, it is crucial to familiarise oneself with the rules and regulations governing pensions in the UK. For more information, please visit the UK government’s pension page or check the Wikipedia page on pensions in the United Kingdom. Remember, taking the step to withdraw your pension before 55 is a significant decision:

• Consider all the facts, seek advice, and make a choice that ensures your financial security in the long run.
• Making sure you have enough money to draw on in your retirement years is critical. You need to be aware of your pension optionsand seek professional financial advice.

If you’d like to find out more about pensions, the pension guide on the Moneyfarm website provides excellent additional information.

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