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FAQs about accessing my pension early

Are you thinking about retiring early? If so, here are answers to frequently asked questions about accessing your pension early.

When can I take my pension?

According to recent reforms in pension rules, you can access your pension money when you are 55 years old. However, it’s worthwhile considering if this is advisable because you may have to pay considerable fees. However, some exceptions entitle you to an early access pension.

Special criteria for early retirement before 55

Below are the groups of individuals who can be considered worthy for early retirement without objection:

  • You are in poor health.
  • You may have a protected pension age lower than 55.
  • If you are given less than a year to live and below 55, you may be able to access your entire pension amount tax-free.
  • Your profession allows early retirement, for example, a professional athlete or sportsperson.

Considerations when thinking about an early pension

Always consider your alternatives carefully before making any decisions. For example, do you have enough money to live on? How long will the amount of your pension pot last for? Can you afford to retire early?

It is essential to speak to a financial adviser who will guide you on the steps to undertake and if accessing your pension early is the best option. If you are eligible for an early pension, do not forget to contact your pension provider.

What are the drawbacks of pension release below 55?

Typically, you can only retire before 55 in exceptional circumstances. If these don’t apply to you, you will have considerable fees to pay — so it’s not recommended.

For example, HMRC can charge up to 55 per cent tax on the withdrawal amount. Therefore, reputable pension providers will usually refuse to help you access your pension early. In some instances, a third party could assist, but they will charge you 30 per cent. The end result? Accessing your retirement fund too early could leave you with a meagre 15 per cent of your pension.

What are the advantages of pension release over 55?

You are entitled to access up to 25 per cent of your pension fund tax-free. This can be either in instalments or a lump sum, and there is no ceiling on the amount.

Can I take my pension and continue working?

Yes. However, there are some drawbacks whereby you will some of the pension on tax, as it is considered like any other form of income. In addition, there is a reduced annual allowance as the amount you will pay yearly will be smaller.

What are the advantages of taking a pension while working?

Working and receiving a pension allows you to put your creativity into work. So, for example, you could open a business that you have always wanted to. Or you could enjoy a more leisurely lifestyle while boosting your income at the same time.

Do I pay tax on my pension if I take it early

Yes. The amount of pension tax paid depends on your earnings while working. The higher your income, the higher your pension tax up to a certain amount.

Income Tax Rate (%)
£0 - £12,570 0
£12,571 - £50,270 20
£50,271 - £150,000 40
£150,000 and above 45

How can I avoid scams when taking my pensions early?

Pension frauds are many and can be fatal. For example, you could end up losing all your retirement money and face a tax charge of up to 55 per cent on the amount withdrawn or transferred.

Here are two handy tips to avoid losing a chunk of your retirement money:

  • Do not share any details about your pension with anyone unless they are a trusted financial adviser.
  • Suppose someone approaches you about early pension release before you’re 55. In that case, it may be a pension scam, and you should report them immediately to FCA.

Please note:

  • The value of pensions and the income they produce can fall as well as rise. You may get back less than you invested.
  • Tax treatment varies according to individual circumstances and is subject to change.

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