Posted in:

When can I access my private pension?


Many people begin taking money from their pensions between the ages of 60 and 65. For many of us, it’s the time when we often think about either lessening our working hours or retiring. However, if you have a workplace pension, you can start thinking about this even earlier – once you reach the age of 55.

When can I access my private pension?: Summary Table

🤔️ Can I withdraw cash from my pension pot?Yes, but under certain conditions
🔞 Can I access my private pension early?Yes, at age 55
🤑 How much of my private pension is tax free?25%
❓ What can I do with my 75% taxable pension pot?• Take part or all as cash
• Get an annuity
• Get a flexi-access drawdown

If you’re asking yourself, when can I access my private pension? – the particular topic of this blog – like a workplace pension, the answer is, from when you reach 55.

Can I access my private pension early?

Accessing a private pension early is no problem, but there are certain constraints that you have to take into consideration.

  • The soonest you can access your private pension is when you’re aged 55
  • You can only take 25% of your pensions pot before you pay tax.

Pension freedom legislation came into force back in April 2015, allowing you to flexibly access your private pension at the age of 55, which answers the question of, can I access my private pension early?

How much can I take out of my private pension at 55?

You have complete access to private pension funds once to get to 55. In other words, you can take out everything in your pension pot in one lump sum, or you can take out smaller sums on numerous occasions, as and when the need arises. However, it would be best if you exercise caution.

Not only could you penalise yourself in terms of income tax, unless you are taking pension funds to buy an annuity or invest in something else, but you could also find that when you reach retirement age, you have little or nothing left other than your state pension.

Investing money in your 50s

The earlier you begin investing, the better. But if you are a late starter considering taking some money out of a workplace or private pensions when you get to 55 for investment purposes, you need to know how to invest money. If you are a novice, it’s advisable to seek professional financial advice.

Retirement age is no longer an enforceable concept in most instances. However, when it comes to your state pension, if you were born before 1955, the current full benefit age is 66 years, 2 months. This will gradually increase to 67 if you were born in or after 1960. The amount you’ll receive is calculated according to your National Insurance record when you reach the state pension age.

With life expectancy increasing in general, and if you are lucky enough to avoid serious ill health, you might decide to continue working after reaching the state pension age. However, deferring state pension is always an option to keep income tax to a minimum.

How much should you have in your private pension when you’re 50?

When you reach your 50s, you may need to review your 50s retirement savings plans. You might find that accessing a private pension at 55 is not as important as ensuring you have enough in your pension pot for your retirement years.

If you think you will have a shortfall, you need to take action, and your first port of call should be to get some professional financial advice. Part of that advice might be amalgamation if you have several workplace pensions.

We make money simple for over 80,000 investors

Find your ideal ISA today

Start now

Pension consolidation

As long as your employment circumstances meet the criteria, all employers must provide you with a workplace pension – it’s something called automatic enrolment. As a result, it is not unusual for people to accumulate several workplace pensions throughout their working lives.

But when you’ve got several pensions on the go at once, keeping tabs on their performance can be tricky. If this relates to you, you might want to consider a pension transfer.

You don’t have to ask yourself when can I access my private pension or workplace pension when talking about pension transfer. You can access your pension for transfer purposes at any age with private or workplace defined benefit, or defined contribution pensions, providing the scheme’s rules permit it. If in doubt, check with the pension provider.

Pension options for the self-employed

You won’t benefit from a workplace pension or auto-enrolment if you’re self-employed. You’ll have to do it yourself, and you should. Taking out a personal or private pension is just as important as paying national insurance contributions, so you qualify for the state pension when the time comes.

A private pension for the self-employed has the same benefits as any private pension. So, if you are asking, can I access my private pension before 55 when I’m self-employed, you’ll be pleased to know that yes, you can. However, investing can be tricky, especially for the uninitiated. Therefore, you may find it wise to track down an independent financial services management company with whom to discuss your investment aspirations.

FAQ

Can I have access to my pension before age 55?

It is not illegal to gain access to your pension before the age of 55, and most personal pension schemes set an ‘age’ at which you can start taking out money from your pension. However, taking your pension before 55 is highly discouraged due to hefty fees. You also run the risk of having limited funds left at the end of your working life.

Can I take money from my private pension at 55 and still work?

The answer is yes, as there are various reasons why you will want access to your private pension at age 55. You can continue working until retirement and also take out money from most private pension schemes from age 55.

What are the disadvantages of taking out your private pension early?

The growth and value of your pension pot may be affected even with continuous contributions. This is because your pensions growth potential has been cut short with less time invested in the market. Money purchase annual allowance may apply with early pension withdrawal, which reduces tax-free private pension contributions from £40,000 to £4,000 each tax year.

 

Match with a portfolio and start investing today

Simple, efficient and low cost, Moneyfarm helps you protect and grow your money over time.

Sign up with Moneyfarm today to match with an investment portfolio that’s built and managed to help you achieve your financial goals.

Make your money work harder for you, without breaking a sweat.

Get started

As with all investing, your capital is at risk. The value of your portfolio with Moneyfarm can go down as well as up and you may get back less than you invest.