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    Withdrawing your pension

    Ready to access your pension? Accessing your pension at age 55

    Home > Retirement Planning > Withdrawing your pension

    Accessing and withdrawing your pension

    Cashing in any amount of your pension is a big decision. It will affect any future possible growth of your fund. It will trigger the Money Purchase Annual Allowance if you withdraw anything more than your tax free lump sum (pension commencement lump sum). And you’ll need to decide what you want to do with the rest of your pension funds. Don’t panic. Independent financial advice can help you take control of your retirement.

    Common reasons to start drawing on your pension include taking a phased retirement, paying off a mortgage or other debts, or making changes to your home to make it more accessible. Just because you can withdraw pension funds at 55 doesn’t mean you have to.

    Taking money out of a pension

    Before you make any decisions to access your pension, think about how much you have and how long you need it to last. Our Pension Calculator can help you work out what your retirement could look like with the amount you’ve saved.

    Remember, with flexible retirement options you can run out of money if you cash in all of your pension, or if you live longer than expected.

    Try our Retirement Calculator

    Pension withdrawal over 55

    At 55 you’ll have the power to choose how you use your pension pot. It’s up to you to manage your spending and ensure that you have enough income to last for the whole of your retirement. There are four main pension options at 55 for how you can use your pension pot, which we will outline here.

    If you’re not sure how much you’ve built up (and this isn’t uncommon, as many of our clients build up a collection of workplace pensions over time) and you’re not sure where to start, you can ask a Financial Adviser for help.

    Your pension options

    Annuity

    Take as one lump sum

    Take variable lump sums

    Flexi-access drawdown

    Tax free cash?

    Up to 25% of fund

    Up to 25% of fund

    25% of each withdrawal

    Up to 25% of fund, can be phased

    Regular income?

    Yes

    No

    Potentially, if product permits

    Yes

    Guaranteed income?

    Yes

    No

    No

    No

    Can I run out of money?

    No

    Yes

    Yes

    Yes

    Can my tax rate go up?

    Unlikely, as income planned in advance

    Likely

    Depends on the size of lump-sums

    Unlikely, as income planned in advance

    Can unused funds be used as an inheritance when I die?

    Depends on the plan

    Likely

    Yes

    Yes
    Find out more on our Pension Drawdown Advice page

    What to consider before withdrawing money from your pension

    Not all pensions are the same. Some have rules about how and when you can cash in your pension. You will need to check the terms and conditions of your policy to find out what your options are. Before you make any decisions about cashing in your pension, there are a few things to bear in mind.

    Withdrawing your pension

    How can Wren Sterling help?

    There’s a lot to think about with pension withdrawals, but we’re here to guide you through the process. Whether you’re still saving for retirement, or ready to start drawing on your funds, we can help you make the most of your assets. We’ll get to know you and the plans you have for your retirement. Only then will your Financial Adviser make a recommendation to help you achieve your goals.

    Looking for pension advice that’s tailored to you? We’re ready to help.

    FAQs

    • Can I withdraw my pension if I’m under 55?

      Can I withdraw my pension if I’m under 55?

      Usually the earliest you can take money from a Defined Contribution pension is 55 (rising to 57 from 2028). There are two exemptions:

      • Serious illness. Schemes may allow you to access your pension early if you are under 55, and have a serious illness which means you are no longer able to work.
      • Protected Retirement Age. In some careers, such as professional sports, early retirement was anticipated and pension plans set up before 6 April 2006 may recognise this. Membership of an occupational pension scheme since before 6 April 2006 may also confer an earlier retirement age, often age 50.

    • Can you continue adding to your pension if you’ve withdrawn funds?

      Can you continue adding to your pension if you’ve withdrawn funds?

      Yes, even when you’ve started to draw on your pension you can keep saving. You may have an inheritance, or investments that mature after you’ve retired. It’s important to keep the Money Purchase Annual Allowance in mind to avoid unnecessary tax. This is a limit on how much you can save into a pension tax-efficiently once you’ve started accessing your retirement funds flexibly. This prevents double tax relief.

    • Can I take a lump sum from my pension?

      Can I take a lump sum from my pension?

      Absolutely. As soon as you reach age 55 you can start to access your Defined Contribution pensions. How much to take is up to you, but you should keep income tax rules in mind, to avoid paying unnecessary tax.

    • Can I cash in a private pension?

      Can I cash in a private pension?

      Private pensions are used for you and your employer (if applicable) to save money for your retirement. There are two types:

      • Defined Contribution – A pension pot which you and your employer (if applicable) contribute to.
      • Defined Benefit – A workplace pension based on your salary and length of service.

      You can cash in a Defined Contribution pension from age 55. Defined Benefit pensions are slightly more complex. Once you reach the scheme’s retirement age, they will pay out a regular income. You can take advice to transfer these funds to a Defined Contribution pension.

    • What are the risks if I cash in my pension early?

      What are the risks if I cash in my pension early?

      Pension Freedom rules allow more people to take control of their pension funds. This means that its possible to run out of money. You’ll need to keep an eye on your remaining funds and balance your need to replace your working income with having enough money to last for the rest of your life.

      You should also be aware of pension scams which encourage you to withdraw your funds. Pension freedom has created many opportunities for scammers to target people approaching retirement with access to their retirement funds.

      Tips for avoiding scams
      • Reject unexpected pension offers whether made online, on social media or over the phone
      • Check who you’re dealing with before changing your pension arrangements. Check the FCA Register or call the FCA contact centre on 0800 111 6768 to see if the firm you are dealing with is authorised by the FCA
      • Don’t be rushed or pressured into making any decision about your pension

      If in doubt, it’s always best to speak to a financial adviser, who can help you visualise your retirement income and how withdrawals could affect the fund value.

    A pension is a long-term investment not normally accessible until age 55 (57 from April 2028 unless the plan has a protected pension age). The value of your investments (and any income from them) can down as well as up which would have an impact on the level of pension benefits available. Levels, bases and reliefs from taxation may be subject to change.
    The Financial Conduct Authority does not regulate tax advice.
    This article is for information only and does not constitute advice.