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When can I retire?
The age at which you can retire depends on a couple of factors. The first, which we discussed in the previous series, is when you’ve built a sufficient pot to support your lifestyle in retirement. The second, is the age locks put in place by the government on when you can access your retirement savings.
When you pay into a personal pension, your money is usually invested in stocks and shares. The value of these investments can rise or fall, so you might get back less than you put in. Returns aren’t guaranteed. Pension tax rules may also change in the future, and any tax benefits you receive will depend on your individual circumstances.
- For most people, the earliest you can access your private pension is the current age of 55, but this is rising to 57 in 2028.
- You don’t need to stop working to take your pension, and you can draw money from your pot while continuing to earn a salary.
- If you are in poor health or have specific ‘protected’ rights in an older policy, you may be able to access your money earlier than the standard age.
When can I retire?
You can technically retire at any age you choose, provided you have sufficient personal savings to fund your lifestyle. However, if you are relying on pension income, your retirement age is dictated by two government controlled access points:
- Private pension age (currently 55): The age at which you can access your own pensions.
- State Pension age (currently 66): The age the government starts paying your State Pension if you qualify. Please note: This is currently rising and will reach 67 by 2028. This change affects anyone born on or after 6 April 1960.
The normal minimum UK pension age
The Normal Minimum Pension Age (NMPA) is the earliest age at which you can legally access your private or workplace pension savings without incurring a heavy tax penalty.
- Until 5 April 2028: The NMPA is 55. (Access at 55 is only guaranteed if you reach that age and crystallise your funds before 6 April 2028).
- From 6 April 2028, the NMPA will rise to age 57.
How the age increase affects you
The move from age 55 to 57 will affect you if you were born after 5 April 1973. If you fall into this group and are planning to start taking money at 55 or 56, you will need to adjust your plans, as you will generally not be able to access these funds until you reach age 57.
What is a protected pension age?
A protected pension age is a ‘protected right’ attached to certain older pension policies that allows you to access your savings earlier than the Normal Minimum Pension Age (NMPA).
If you joined a specific pension scheme before 6 April 2006 that granted an ‘unqualified right’ to take benefits at an age lower than the current NMPA (such as age 50 or 55), you may be able to keep this right even after the 2028 age increase.
Important Considerations
This is a complex area of pension law and rules vary significantly between providers. Because your eligibility depends on the specific wording in your original policy deed, we recommend seeking professional financial advice. A qualified adviser can review your documents to:
- Confirm if your protected age remains valid.
- Ensure you do not accidentally lose this protection, for example, by transferring your pension to a different provider.
Because the rules depend on the specific wording in your policy deed, it’s recommended to seek financial advice from a professional. Qualified financial advisers can review your documents to confirm if your protection is valid and ensure you don’t accidentally lose it by transferring the pot.
Can I withdraw my pension early?
You can usually only withdraw your pension before the minimum age if you are suffering from serious ill health or have a terminal diagnosis.
- If you are physically or mentally unable to do your job (and in some cases, unable to do any job), you may be allowed to retire early and take your pension.
- If you are diagnosed with less than one year to live, you can often take your entire pension pot as a tax-free lump sum if you are under 75.
- If you withdraw money early for any other reason (e.g. just because you need the cash), it is classified as an ‘unauthorised payment’. The tax penalty is severe and HMRC will charge you up to 55% of the withdrawal amount.
Do I have to retire to take my pension?
You do not have to stop working to start drawing money from your private or workplace pension. This process is often called ‘flexible’ or ‘phased’ retirement. You can:
- Continue full time work and take some pension cash for a specific purchase (like paying off a mortgage).
- Keep working part-time and use your pension to top up your lower salary.
- Stop working entirely and live solely on your pension.
It’s worth noting that if you take taxable income from your pension while still working, your annual allowance (the amount you can save into a pension tax-efficiently) may drop from £60,000 to £10,000. This is known as the Money Purchase Annual Allowance (MPAA).
The tax-free lump sum
For many, an attractive feature of a pension is the ability to take a large chunk of cash completely tax-free. This is known as the ‘tax-free lump sum’, and understanding the rules around it and how it’s taxed is important for avoiding an unexpected bill. Learn more about the tax-free lump sum.