Should I take my pension at age 55?

Should I take my pension at age 55?

Planning for your ideal retirement can be an exciting time of your life, and you will find that there are plenty of decisions to be made and thoughts to have on how your future will look. Your pension is one of those important considerations and the best way to contribute towards a happy and financially secure retirement.

There are plenty of great options out there for you to consider, and it’s worth getting to know them in more detail to make the decision that best suits your individual needs. Remember, you are unique, so what suits you might not suit another person, and vice versa. Therefore, you should take some time to work out the best direction you should take when you reach the age when you can start taking pension benefits. Currently you can start taking benefits from your pension at age 55. But should you?

Here are some important points if you’re thinking of taking your pension at age 55 that you might find useful on your journey to a bright and financially secure future.

What are the rules?

Currently, you can take pension benefits at the age of 55, although due to recent government legislation, the minimum age limit is increasing to 57 from 2028.

This age limit may differ based on the details of your specific personal pension plan, so if you’re unsure, you should reach out to your provider, who can fill you in.

You can also begin to take a workplace pension at 55 if you have the go-ahead from your employer.

Since there’s not a set retirement age, you’re perfectly entitled to take your pension and continue to work for however long you want, using your pension benefits as extra income.

Can I take 25% of my pension at 55?

You can take your entire pension out as soon as you reach 55, but only 25% of it will be tax-free. You can also take smaller amounts if that suits you; it doesn’t have to be the whole pot at once.

The remaining 75% will be taxed as if they were your earnings, so it’s important to think about how badly you need the money now or if you can afford to let it grow for a while.


Pension at age 55


How much will I lose if I take my pension at 55?

You won’t normally lose anything since there isn’t a fixed penalty for withdrawing your money.

However, you may incur greater charges through taxes, as your pension is classed as a source of income. Therefore, the size of your pension pot could take you up into a higher tax bracket.

If you do decide to take it now, you could miss out on a larger tax-free sum later on, which is why it’s important to weigh up your options.

What are my options?

You have plenty of pension options at 55.

You could opt for a drawdown, which happens when you take some of your money out right now and leave what’s left in your pot to continue growing. This is a great flexible option, although it does not guarantee returns on your future investments.

A partial drawdown would also offer more flexibility to take further tax free cash at a later date.

Taking it all out at once is another option, which might be best if you need money as soon as possible. The major drawbacks include a possible large tax bill and the lack of income later on in life.

You could also use some (or all) of your pot to buy a pension annuity, an insurance policy that essentially guarantees you an income in retirement. Still, they can be expensive and difficult to understand.

We can help

There’s a lot to think about with your pension and whether to take it out early, but it can be difficult to assess your situation properly if you have multiple pensions. This is where we can help. We can help you consolidate all of your pensions onto one easily manageable and accessible Self-Invested Personal Pension so that you can see exactly how much you have, which could come in handy when trying to make a decision.

We recognise that saving for retirement is an essential part of life’s rich journey, which is why we have made our online portal easy to use and accessible 24/7. Here you can view and manage your pension as well as choose funds to invest in. Discover more about what we offer here.




The content of this article is for general information purposes only and should not be construed as legal, financial or taxation advice. You should not rely on the information contained in this article as legal, financial or taxation advice. The content of this article is based on information currently available to us, and the current laws in force in the UK. The content does not take account of individual circumstances and may not reflect recent changes in the law since the date it was created. It is essential that detailed financial and tax advice should be sought in both jurisdictions and any legal advice, if required.

This notice cannot disclose all the risks associated with the products we make available to you. When making your own investment decisions it is important you understand that all investments can fall as well as rise in value and it is possible you may get back less than what you have paid in. You should also be satisfied that any investments you choose are suitable for you in the light of your circumstances and financial position. You should seek financial advice if you are not sure of what’s best for your situation.

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