In the UK, there are specific age thresholds and conditions for accessing your pension funds, and it is important to be aware of them.
While retirement age may seem a long way off while you are working, it pays to be prepared, or you might want to even work out whether you could take early retirement.
Below, i details when you can withdraw cash from your pension funds, and how to claim the state pension.
Who can access their pension before 55?
In general, the minimum age for accessing personal and workplace pension savings is 55. This is called the normal minimum pension age (NMPA), and it is due to rise to 57 in April 2028.
Age restrictions like this are put in place to ensure pension funds are primarily used for retirement purposes, and to prevent savers from depleting their funds prematurely.
However, there are a few exceptions which allow certain people to claim their pension earlier.
- Ill-health: If you have a serious health condition and are unable to work, you may be able to access your pension earlier than the prescribed age limit. Check your pension provider’s terms to see if they offer this. and seek professional financial advice.
- Short life expectancy: In certain cases, individuals with a life expectancy of less than one year may be able to withdraw their entire pension fund as a lump sum, regardless of their age. This option provides flexibility for those facing terminal illnesses. If you’re under 75, the withdrawal is tax-free.
- Occupation-specific schemes: Certain professions, such as military personnel or professional athletes, may have pension schemes with different rules and age limits.
- Pension schemes with an earlier retirement age: Some older pension schemes may have different age thresholds for accessing funds. This is only likely to be the case if you joined the scheme before 6 April 2006. Contact your pension provider if you are not sure of their terms.
Who can access their pension after 55?
The state pension age is currently 66 for the current cohort of new retirees, and it is scheduled to rise to 67 and then 68 in the coming years. These ages mark the earliest you can access your state pension, but there are more options available for personal and workplace pensions.
Thanks to the NMPA, you might be able to withdraw from your pension once you turn 55, or 57 from 2028.
On a defined contribution pension, you can usually start taking an income or a lump sum from the scheme, or both. You can even continue to work while you do this. Some people use the option to reduce their working hours or go into semi-retirement.
But beware that taking money out of a pension can limit its ability to grow, and put you in a worse position down the line.
“Accessing your pension at 55 or even 57 puts a lot of pressure on the fund,” says Jeannie Boyle, director and chartered financial planner at EQ Investors. “You might need the money to last another 40 years.”
Defined benefit pensions usually do not let you access the funds until the age of 60 or 65.
How to claim the state pension
Whether you have accessed any private pensions or not, you will become eligible for the state pension once you reach the official age. Currently 66, with plans to increase it to 68, the level could change further in the future if the government decides to raise it.
No later than two months before you reach state pension age, you will receive a letter from the Government providing information on how to claim. If you haven’t received a letter, you can still apply by contacting the state pension claim line or completing the relevant application forms available online.
If you do not claim the pension, it will automatically be deferred until you choose to start taking from it.
