How do my pension options change at 55?

Here’s the good news: things get a whole lot more interesting with your pension pot when you reach the age of 55. Now that is something both to look forward to and plan for as you approach the retirement zone.

Thanks to the pension freedoms, introduced by the government in 2015, you can now withdraw as much of your retirement savings as you like from the age of 55, as long as you have an eligible scheme. This means you have more flexibility than ever before when it comes to how you use your savings as you approach retirement.

You may decide to use some savings to tackle an immediate financial need. On the other hand, this is money you have put away to provide an income when you wave goodbye to the 9 to 5. And taking pension money early could leave you with less to live on in retirement. The key is to weigh up what you need now against what you may need in the future.

That’s quite a balancing act! Let’s see how it can be done and all the options that are available to you.

The retirement times are a changing

We appear to be living in strange times: on one hand the government is moving the official retirement age further and further away – and on the other hand, we are now allowed to use pension savings earlier. What’s going on?

Well, basically, the official retirement age is gradually being put back because we are all living longer, and we are generally a good deal healthier. Therefore, we can work longer and enjoy a longer and active retirement. This, in turn, means any money put aside for our autumn years must last longer and work harder.

Enter pension freedoms

To support all these changes, we have pension freedoms. Rather than wait until your 60s, you can access those savings you have made any time after the age of 55 (as long as you have an eligible scheme). By accessing appropriately, you can ease financial problems or enhance your living standards in the run up to retirement.

However, it is important to remember that you will need those savings to look after you financially throughout your later life, so you must be cautious in how you use your pension freedom options. You will need professional advice from a regulated financial adviser. Portafina offers a no-obligation check of your pensions.

What are my options?

Ok, so you have reached 55 and the idea of retiring is looming on the horizon. The actual date could be some way off though and we are all looking for that extra bit of financial help to see us through trickier times, or as a treat when we deserve it.

Why are people accessing their pensions?

In our experience, the three main reasons Portafina clients1 are releasing money early from their pensions are:

Whatever the reason, there are different ways in which you can access your pension pot. The option you decide upon will directly relate to your current circumstances.

How does it work and what are the benefits?

 Let’s take a look at your fundamental options:

Tax free cash

It may be that you need some extra money to buy that new car you have always promised yourself. Or maybe you need a small amount of cash to put towards that dream house for your son or daughter. Whatever the reason, the good news is that with an eligible scheme you can take up to 25% of your pension savings totally tax-free from the age of 55.  Money that remains in your pot will continue to be invested by your pension provider.

Pension release

When you take money from your pension it is called Pension release – and you can take money from your pension as many times as you wish. This is also called withdrawing lump sums. Always bear in mind that only the first 25% is tax free. After this point any savings you access from your pot will be classed as income – and therefore taxed at your relevant rate2. Work closely with a regulated financial adviser to ensure you are not putting your future savings at risk and you are attaining maximum benefit from your savings.


Another option is to take money from your pension pot in the form of a regular income. The first 25% would of course still be tax-free. This method could be a great way to bolster dwindling incomes in later life or a way to downsize on your workload as you approach your retirement years.

Is everyone over 55 eligible for pension freedoms?

When you reach the age of 55 you can access your pension savings if you have the pensions which allow you to do so. That is – personal and private pensions, company pensions and even final salary pensions. You cannot access your State Pension or unfunded pensions. In some cases, if access to pensions is not allowed, this can be remedied by considering other pension funds which offer the same benefits and access. In other words, it may be beneficial to transfer your savings to a more viable pension fund.

Greater peace of mind with Portafina

Your pension pot was originally designed to give you financial peace of mind and flexibility in your post-work years. The idea that early access to these savings could free you of current financial issues can be very seductive. But trying to grapple with the complex world of pensions can be a bit of a minefield. You will need to strike a healthy balance between sustaining your future savings pot and working through difficult financial decisions in the here and now. This is why the guidance of a regulated financial adviser such as Portafina is imperative.

Here at Portafina we make the process hassle-free. We will offer you a no-obligation pension check in order to determine the best way for you to move forward and how or whether access can be made.

Click here to get started with Portafina

1Portafina statistics: primary reasons for clients taking tax-free cash up to 4th November 2020
2Tax is based on current HMRC regulations and is subject to change

Thinking about your pension options?

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The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.