Your pension might be one of the single largest assets you own. As a result, whether you have life goals you’re determined to achieve sooner rather than later, or the cost of living crisis is putting pressure on your expenses, this may leave you wondering: “can I withdraw my pension before 55?”.
So, read my guide to discover whether you can withdraw your pension before 55, and if this may be a sensible decision or not.
Also consider: My guide on how to transfer a pension
- You can’t typically withdraw funds from your pension before the normal minimum pension age – currently 55 in the 2022/23 tax year – or the scheme age for defined benefit pensions.
- There is likely to be a significant penalty for withdrawing your pension before 55 and you may expose yourself to third-party scams in the process.
- If you have specific medical circumstances, it may be possible to access your pension early.
Can I release money from my pension early?
Generally speaking, it isn’t possible to release money from your pension before age 55. That’s because there’s a normal minimum pension age (NMPA) in the UK which, in the 2022/23 tax year, is age 55 – although this is set to rise to 57 in 2028.
As a result, pension providers will prevent you from withdrawing your funds before your NMPA. This is true for most defined contribution (DC) pension schemes, whether that’s a workplace pension, personal pension, or private pension.
For defined benefit (DB) pension schemes, this age is set by the scheme and is typically around age 60 or 65.
There are many third-party firms that claim to be able to get you access to your funds early. However, while it might be technically possible to gain early access to your pension, there are severe penalties in place to discourage you from doing so that can drastically reduce the value of your funds, making it an extremely difficult and costly thing to do.
For these reasons, it’s very rare to find a pension provider that will give you early access to your pension savings.
Despite this, there are certain professions and specific circumstances that could allow you to access a pension early.
Accessing your pension early if you are in poor health
If you are in ill health, depending on the stipulations of your pension scheme, you may be able to access your pension early if you have any of the predetermined health conditions specified in your pension plan.
Normally, if you have a serious medical condition or less than a year to live, you could be allowed to access your pension funds early, and in the form of a lump sum.
If approved, accessing your pension early in this way will waive the tax charges usually levied on early pension release – this can be up to 55% of your pension pot.
Pension providers typically have very specific criteria that determine whether people in ill health can access their pension earlier as a tax-free lump sum. It’s important to ensure you meet any requirements before deciding to withdraw money from your pension early.
Protected pension age
If you were in certain professions on or before 5 April 2006, you may have what is called a “protected pension”. Protected pensions have a lower minimum age before the funds can be accessed.
So, if you have a protected pension that started on or before 5 April 2006, you may be entitled to withdraw money from your pension earlier than the current minimum age of 55 without incurring a penalty tax bill.
Some dangerous vocations or jobs that are heavily involved in sports may have pensions that allow you to take your pension before 55.
Besides the numerous sports professions, divers and members of the Reserve Forces are two occupations that are listed on the government website as possibly having a protected pension age.
It may be worth you checking this list if you think you may have a protected pension.
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Taking your State Pension early
The State Pension Age is non-negotiable and one that you must simply wait to reach before receiving any of the available funds.
As a result, receiving funds from the State Pension before you reach State Pension Age is entirely impossible.
Are there any penalties for accessing my pension before the minimum age?
Withdrawing money from your pension early, also sometimes known as “pension unlocking”, could expose you and your funds to great risk and you could lose a significant amount of money by doing so.
The tax implications of withdrawing a pension early
If you don’t meet the criteria making you eligible to access your pension pots early, any withdrawals made before the NMPA may be considered “unauthorised payments”.
You’ll likely receive a tax charge of up to 55% of your withdrawn sum if you withdraw funds when you aren’t eligible for early pension release.
This is something that is worth strongly considering before accessing your pension early – you could jeopardise your retirement savings and may have to work much longer than you expected to before being able to retire.
Using a third-party provider
Most of the time, reputable pension providers will refuse to give you early access to your pension as a result of the severe penalties it carries.
This often means relying on a third-party provider to execute the withdrawal for you, which is likely to incur yet another fee on the remainder of your pension – often up to 30% of your pot.
After this, it’s possible there could be as little as 15% of your hard-earned money left in your pension pot.
Pursuing an early pension release may also put you in dangerously close proximity to scams that could steal your entire pension.
A pension scam could involve someone trying to entice you into revealing details about your pension fund with the promise that they can get you early access to your savings or that you could retire early.
Unfortunately, this type of promise is often entirely fraudulent and could see you lose the entirety of your savings to a scammer.
It’s worth strongly considering whether taking money early from your pension is worth the risk of losing your entire pension pot.
You should always be vigilant and stay cautious of any companies that are not authorised and regulated by the Financial Conduct Authority (FCA).
What if someone approaches you?
Cold-calling someone about their pension was banned in 2019 and is simply illegal.
So, if someone approaches you about accessing your pension early – whether in person, through the mail, electronically, or over the phone – you should not reveal any kind of information or engage in any type of dialogue.
It’s likely the people trying to contact you have malicious intentions and may try to convince you to withdraw your pension early simply for their own benefits.
You can report instances of pension cold-calling to the Information Commission Office or by calling 0303 123 1113.
Can I use my pension to pay off debts before reaching the minimum withdrawal age?
Debts or loans may be one reason why you are considering making an early withdrawal from your pension.
While it can depend on your personal circumstances, accessing your pension early in order to pay off any debt you have will likely cost you more through lost pension funds than it would save you in interest payments to your lender.
It’s understandable that an overhanging debt can cause some discomfort, but you should consider viewing your pension as a long-term instrument rather than a pool of liquidity – unnecessary withdrawals could result in you working later into your life than you anticipated and force a much later retirement.
Can I retire and receive my pension before the age of 55?
When considering your retirement in the same thought as your pension, it can be useful to remember that the two are not directly correlated – accessing your pension early does not necessarily grant you an early retirement.
I mean this in the way that you can retire whenever you like – there is no minimum age at which you have to stop working.
However, it’s fairly unlikely that you will have enough money to fund your retirement for the rest of your life if you retire particularly early. This is where a pension could help to fund your retirement.
While you can retire and access your pension before the age of 55, it’s highly likely that you would not be able to finance this kind of retirement after having to pay tax for the sake of an early withdrawal.
Can I withdraw my pension and continue working?
While the NMPA prevents you from accessing your pension early, there is technically no formal national retirement age.
As a result, if you aren’t ready to say goodbye to your working life, or you simply enjoy your job too much, it is completely possible to continue working after withdrawing your pension.
Also known as a “phased retirement”, such a style of retirement allows you to continue working while taking reduced hours. Some people do this for the regular income to their pension, or out of devotion to their craft.
In other cases, some people can’t realistically afford to retire entirely on their pension, making continued employment a necessity.
It’s also possible to continue paying into your pension after withdrawing from it. So, you don’t have to ditch your pension once you decide to take from it.
Frequently Asked Questions
How much of my pension can I withdraw before reaching the minimum age?
Do I pay National Insurance on my pension funds?
A pension is a long-term investment. The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation and regulation, which are subject to change in the future.
Workplace pensions are regulated by The Pension Regulator.