In the run up to retirement, your pension and retirement ages become important as they will help you plan your retirement income. Let’s take a closer look.
What does it mean in terms of the State Pension?
Your State Pension age is set by the government and is the age at which you can start receiving an income. This is currently set at 65 for both men and women and is expected to rise in the coming years.
What does it mean in terms of my private pensions?
When you or your employer set up your private pension, a retirement age would have been set either automatically or by yourself. This is a projected age at which you are likely to retire, and you can change this at any time.
This doesn’t mean that you have to take your pension at this age. It simply helps your pension provider to manage your pension in the best way. The money in your pension is invested in the stock market, and different investments have a different level of risk attached to them. When retirement is a long way off, your money is likely to be placed in higher risk investments. When you are younger you can afford to take more risk because, even if there are dips in the market, you will still reap more reward in the longer term. However, the closer you are to retirement, the less appropriate high-risk investments become. So, as you approach your retirement age, your money will be moved into lower risk investments to secure your savings in preparation for retirement.
What if I don’t want to take my pension just yet?
If you reach State Pension age or the retirement age you agreed with your pension provider and you feel that you don’t need to receive an income just yet, you can defer your pension. This simply means pushing back the age at which you start receiving your pension. Doing so can increase the money you receive when you do start taking an income.
Can I take my pension early?
You can’t access the State Pension until you reach State Pension age. However, you can start to access your private pensions from the age of 55. This can be in the form of one-off lump sums or taking an income. It’s important to remember that taking money early from your pension can leave you with less to live on later in life. So, it’s a good idea to speak with a financial adviser before you access your pension to make sure you are leaving your future self financially secure.