Is pension release legal?

Pension release simply means taking money out of your pension. As long as you follow the rules it is completely legal, although as there are a lot of scams out there it makes sense to get help from a trusted professional.

The quick and easy guide to withdrawing money from your pension

This guide explains the basic rules around taking money out of your pension, including the types that do not allow it and how to avoid losing your money to scams. Towards the end of this page you will also find answers to some of the common questions people have.

The headline facts at a glance

If you have the right kind of pension, you can usually make withdrawals from the age of 55.

  • There are no restrictions on how much you can take.
  • The first 25% is tax free; the rest is taxed as regular income.
  • Certain workplace pensions may have their own age restrictions so it is worth asking your HR department if you are unsure.

What are the right kinds of pensions?

Withdrawals can be made from any private pension and most workplace pensions, although if you are in a scheme that offers a guaranteed income in retirement you may have to transfer to a private scheme before you can take any money from your pension.

You can no longer withdraw lump sums or transfer out of unfunded public sector schemes, which may include emergency services, the NHS, armed forces, civil servants and teachers. Pension release also does not apply to the State Pension.

Can money be withdrawn before 55?

For the majority of people the earliest money can be taken from a pension is from the age of 55. It is only in very rare circumstances, such as extremely poor health, that people are allowed to access their pensions earlier.

Are there any risks with pension release?

Some pensions, such as final salary schemes, offer a guaranteed income for life as well as additional benefits. Transferring out of this type of scheme to release money might not be the right option for you because you will lose these benefits.

There is also the risk of falling victim to a scam. The easiest way to protect yourself is to only take regulated financial advice. Scams can be very convincing and often claim that with a loophole you can withdraw money from your pension before you are 55. This could lead to a tax bill of 55% or more, on top of the fees you would be charged from the company that persuaded you to access your pension in the first place. Worst of all, your savings could be placed into very risky investments or disappear completely.

Everyone’s circumstances are different, so accessing a pension early is not always the most appropriate option. Our speciality is showing our clients what we believe to be the best choice for them, which may be taking money or it may be leaving their pension exactly as it is, and it doesn’t cost a penny to receive this recommendation.

Request your information packRequest your free information guide

Get a deeper understanding of the current pension freedoms with our FREE information guide. Complete the quick and easy enquiry form on the right and we will send you all you need to know about taking tax-free cash from your pension and what it could mean for you. We will also let you know how our no obligation pension review works; why it won’t cost you a penny to receive our full, independent advice; and how to take advantage of it.

More information…

You might have a number of other questions about taking money from a pension. If you can’t find the answers below then why not give us a call and we will talk it through with you.

Why are my withdrawals taxed?

The great thing about pensions is that most people pay no tax on the money contributed to them. Any growth on those contributions is also tax free, which helps your fund grow larger in a shorter space of time. Instead of taking the tax upfront, the government counts the money you take out of a pension as earnings and applies tax at that stage.

Can I take money from my public sector pension?

This depends on the type of public sector pension you have, as some of them allow money to be taken out and others do not. People in ‘unfunded’ pensions will not be able to take money from them before they retire. If you are unsure what type you have then your employer should be able to tell you.

Won’t taking money from my pension mean I have less to live on in retirement?

Quite possible, yes, taking money from your pension could reduce your income in the future; although, for many people using pension money to tackle something now makes perfect sense. In our experience, some of the common things people use their pension money for include clearing a debt, making essential home repairs or paying towards a family wedding.

There is a lot to consider, which is why taking advice from a regulated financial adviser before making a decision is so important. The key thing is to balance the importance of your current needs with what you may need in the future.

Call 0800 304 7288 for a friendly chat about your pension

Stephen's pension documentary

Stephen finished his documentary

Documentary-maker Stephen took money from his pension to complete his long-in-the-making documentary “After ‘82”, which explores the history of the AIDS crisis in the UK. Click the link to watch Stephen's story.


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Alan's pension release story

Pension cash enabled Alan to clear debts

Alan had credit cards charging high rates of interest. Taking some tax-free cash from one of his pensions allowed Alan to clear the cards, and the rest remained invested for the future. Click the link below to watch Alan's story.


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Finding Mark's pension

Finding old pensions changed Mark’s future

Mark wanted us to find his pensions from previous jobs. Tracking them down gave him almost £20,000 more for the future. We then combined them into a single pension fund, giving more control than before. Click the link below to watch Mark's story.


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Frequently asked questions

Important information

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.

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