You can take money from your pension at 55 as long as you have the right type of scheme:
- The first 25% would be tax free
- After the first 25% you take, any withdrawals would be taxed as income
- Taking money early from your pension could leave you with a lot less to live on in retirement
In almost all cases you cannot take money from your pension before the age of 55. If a company says you can, it’s probably a scam.
Why are so many people taking money from their pension early?
Thousands of people across the UK are taking money from their pension pot early to tackle a current pressing need or opportunity. In our experience some of the most common reasons include:
- Tackling a long-standing financial commitment such as a mortgage, loan or credit card.
- Supporting a family member with a big life event such as a wedding or deposit.
- Making important upgrades to the house.
These are just a few examples and you might have a completely different reason for wanting to take money early from your pension. The big thing to consider is the impact this could have on your life further down the line.
Is taking money from your pension the right thing for you to do?
To answer this question you first need to balance the importance of what you currently need with what you might need in the future.
Taking money from your pension now could reduce your income and therefore affect the way you live your life when it is time to retire. On the flip slide, for many people considering this option, resolving their current need can have a lasting positive impact on their future.
It is not an easy decision to make. And that is why many people seek advice from a regulated, independent financial adviser, someone who knows pensions inside out and who will do all of the hard work for you.
How do you take money from your pension early?
This all depends on the type of pension, or pensions, that you have. Sometimes you can make the arrangements direct with your provider. In many cases, though, you must take financial advice before withdrawing any money early from your pension. This regulation is in place to protect people as, depending on your circumstances, transferring out of certain schemes might not always be in your best interests.
We have already helped thousands of clients to withdraw the money they need, and for many others we have recommended they are best off leaving their pension savings exactly where they are. The good news is that our initial investigation into your pension is free and in many cases we can continue to provide full advice with no obligation should you need it.
Can I release money from my pension if I am under 55?
Generally you must be aged 55 or over to release money from your pension. In very rare circumstances, such as extremely poor health, then you may be able to take money from your pension before you are 55.
Can I take money early from all types of pensions?
You can take money from any private pension and most employee schemes, although final salary (also known as defined benefit) schemes may need to be transferred to a personal scheme first. You cannot use pension release to take money early from the State Pension or unfunded public sector schemes which cover organisations and professions including the NHS, teachers, armed forces, civil servants, firefighters and the police.
Is there a cut-off age, after which I cannot take money from my pension?
No, as long as your savings are invested in a pension that allows you complete access then you can take money from your pension whenever you want to.
Am I going to have to pay the tax man?
You can take the first 25% of your pension pot tax free. After that withdrawals are taxed. The amount you are taxed depends on which tax bracket you fall into once all of your income sources, including any money that you take from your pension, have been added up.
What will it cost me?
If you want to take money early from your pension then the best thing – and in some cases the only thing to do is seek regulated financial advice first. Generally the adviser will review your pension before giving their recommendation and the cost for this can vary wildly. Our initial investigation into your pension is free. And in many cases we can continue to provide full financial advice with no obligation should you need it. Any advice charges would be confirmed in writing before you have to make a decision to proceed. This means you can walk away better informed with nothing to pay.
When do I have to seek financial advice before taking money early from my pension?
If you have built up more than £30,000 worth of contributions into either a company final salary pension (also known as defined benefit schemes), or a pension with a guaranteed annuity rate, then you must take advice before withdrawing any money early from these types of schemes.
A quick reminder that the tax you pay depends very much on the current rules and your personal circumstances, and so could change in the future.