When can I withdraw my pension?
19 Mar 2024
As retirement nears, you may wonder about accessing your private pension funds. Let’s explore key points to know when you're thinking about diving into your pension savings.
Considerations for Withdrawing Your Pension
Before you tap into your pension, consider your age, health, the type of pension you have, and how you want to access your savings. Typically, you can start withdrawing from most private pensions at age 55, which will rise to 57 starting in 2028.
Ways to Access Your Pension
Once you reach the eligible age, there are several ways to access your pension:
Withdraw the entire pot: Take out all your pension savings in one go.
Smaller lump sums: Draw smaller amounts as needed.
Flexible drawdown: Withdraw variably, depending on your needs over time.
Annuity: Purchase an annuity for a consistent income.
Remember, the first 25% is tax-free, while the remaining 75% is taxable based on your individual circumstances.
If You're Not Ready to Withdraw
If you don't need the funds immediately, you can leave your pension invested or continue contributing to it, with certain limitations if you're already making withdrawals.
Seeking Guidance
Consulting a financial adviser or using resources like Money Helper—a part of the Money and Pensions Service—can provide clarity on tax implications and the effects on state benefits. This support can be accessed from age 50 onwards, offering face-to-face or phone advice.
Withdrawing Early
Withdrawing before retirement age is permissible but could be expensive, potentially incurring up to a 55% tax rate. Managing your withdrawals efficiently can reduce unnecessary tax burdens and ensure your pension lasts through your retirement.
Regular Reviews are Key
Keep an eye on your investments and the totals in your pot. Market fluctuations can affect your savings. Planning your withdrawals wisely and revisiting your financial strategies can help ensure you have enough funds for later life.
State Pension Basics
Separate from private pensions, the State Pension age, which is currently 66, sets the earliest age you can start receiving State Pension benefits. This age is slated to rise to 68 by 2046. Eligibility for the full new State Pension requires 35 qualifying years of National Insurance contributions.
Use the government’s State Pension age calculator to verify your own State Pension age.
Let's Wrap
Understanding when and how you can withdraw from your pension is crucial for making informed decisions about your retirement finances. Whether it’s private pensions or State Pensions, planning ahead and seeking professional advice can pave the way for a secure and enjoyable retirement. Equally, having a good understanding of how much you have is valuable, and the Penny mobile app can bring your pension savings together to make this simpler!
