When can I take money from my pension?
A great benefit of pension schemes is that you can usually start taking money from them from the age of 55. This is well before you can receive your State Pension.
Taking money from your pension
Whether you have a defined benefit or defined contribution pension scheme, you can usually start taking money from the age of 55. You could use this to help top up your salary if you are still working, to enable you to work fewer hours or to retire early. You may also be able to release a cash sum from your pension too.
There are also some circumstances when you may be able to take money from your pension even earlier than 55, such as if you’re in poor health or in a profession where your normal retirement age is earlier than normal, for example if you are a professional athlete. You may also have a protected pension age lower than 55 under the rules of the Scheme. If you think this might apply to you, you should ask your scheme administrator as soon as possible, or contact us to to talk it through with one of our team.
The government has confirmed plans to increase the minimum pension age from 55 to 57 from 2028, alongside planned increases in the State Pension age to 67. From then on, the minimum pension age will remain ten years below State Pension age.
If you’re a member of a workplace pension scheme, you generally require the consent of the employer or ex-employer to take benefits early. In some instances, you may also need the consent of the pension scheme trustees.
If you have a private pension, you don’t need the consent of an employer or the pension provider to take benefits early, if the terms and conditions of your contract allow you to do this.
If you are a member of a defined benefits scheme, your pension may be reduced to take account of the fact that you are being paid early and for a longer period of time. If your membership includes an element relating to contracting out of the state scheme between 6 April 1978 and 5 April 1997 then there will be a certain minimum amount that must be payable by the scheme which is known as a Guaranteed Minimum Pension (GMP). If your pension is not going to be at least equal to your expected GMP when it becomes payable, early retirement may not be possible.
Do I have to retire at my pension scheme’s normal retirement age?
If you have a workplace scheme, you may need your employer’s permission, or the permission of the trustees, to retire early or late. If you have a private pension scheme, you should check carefully whether there are any penalties for accessing your pension benefits early or late. For older schemes, you may lose a with-profits bonus or a guaranteed annuity rate.
Are there benefits to retiring later?
If you have a defined benefit scheme, you may need your employer’s or the trustees’ permission to retire late. Your pension may be higher if you do retire later and the pension scheme’s rules will say how any increases will be calculated.
If you have a defined contribution scheme, you should check whether there are any penalties for retiring late. As your pension pot is invested, its value may go up or down in the time before you retire. The downside is that you will not have use of the money. If you decide to retire late, you should also ensure that your money is invested appropriately, which will often mean moving out of less risky assets.
Where can I find out more?
If you need more information, please contact us. A pension specialist from our team will be happy to help with whatever pensions-related question you have. Our help is always free.