When and how you withdraw money from your pension will depend on your age and the type of pension you have. You can normally access your personal and workplace pensions from your mid-late 50s, while the State Pension is currently payable from your mid-late 60s. You can continue working when you start claiming your pension or delay taking your pension by a few years if you prefer.
Below we look at when and how you can access your pension, as well as the potential impact of early withdrawals.
We hope you find this article helpful, but it’s not personal advice. You should check you're making the right decision for your circ*mstances and that you understand your options and the risks. The government's free and impartial Pension Wise service can help you and we can offer you advice. When you take money from your pension, up to 25% is usually tax free and the rest is taxed as income.
Tax rules can change and their benefit depends on your personal circ*mstances.
Can I withdraw money from my pension before 55?
The earliest you can take money from your personal or workplace pension is usually 55 (rising to 57 from 2028).
Unless you meet specific conditions, any early withdrawals made before you’re 55 will be subject to tax charges of up to 70%. A company offering early access to money in a pension can be a sign of a pension scam so be vigilant.
If you want to access your personal pension pot, there are three main ways you can do this. You can also mix and match income options which could help you find the right balance of security and flexibility.
Some options cannot be changed once selected so it is important to look at all the options carefully.
Annuities - Take up to 25% of your pension as a tax-free lump sum and swap some, or all, of the rest for a regular (taxable) income that’s guaranteed for life.
Drawdown – Take up to 25% of your pension as tax-free cash, and then keep the rest invested. Take a flexible income (taxable) as and when you need it.
Lump Sums - Withdraw your whole pension or keep some invested. Usually 25% of each withdrawal will be tax free and the rest taxable.
Compare your options – Watch our retirement options video and read our side-by-side comparison table, including each option’s benefits and risks.
The State Pension age is the earliest age you can start receiving your State Pension. This will be different for everyone as it’s worked out based on your date of birth.
State Pension age is currently 66 and is due to increase to 68 by 2046. Although there’s no guarantee it won’t rise quicker or higher than that.
In order to qualify for the new State Pension you must have at least 10 qualifying years on your National Insurance (NI) record, 35 years is needed for the full new State Pension.
You can check your State Pension age using the government’s State Pension age calculator.
Guidance from Pension Wise - It can help you understand what type of pension you have, how you can access your savings and the potential tax implications of each option. But it isn’t financial advice. More about Pension Wise.
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Retirement Advice from HL - Our financial advisers can work with you to: plan your personal budget and retirement income strategy, make sure your investments match your goals and give pension advice, including when and how to take them. Discover retirement advice.
The first factor affecting when you can withdraw your pension is your age. Generally, you'll need to wait until you're 55 to access your private pension - this includes most defined contribution workplace pensions. You won't be able to access your State pension until you reach State pension age - currently 66.
Unfortunately, there's usually a 10% penalty—on top of the taxes you owe—when you withdraw money early. This is where the rule of 55 comes in. If you turn 55 (or older) during the calendar year you lose or leave your job, you can begin taking distributions from your 401(k) without paying the early withdrawal penalty.
The earliest you can take money from your personal or workplace pension is usually 55 (rising to 57 from 2028). Unless you meet specific conditions, any early withdrawals made before you're 55 will be subject to tax charges of up to 70%.
Cash withdrawals are subject to tax. You retain this right if not used at the time you leave your retirement fund. You cannot make any withdrawals until such time as you leave your new employer. You cannot make any withdrawals until you retire (minimum retirement age is usually 55.)
While you may have the ability to access some of your investments, such as a 401(k), this isn't possible for the funds in your CalPERS pension account. There is only one instance where you can access your CalPERS pension contributions — when you leave CalPERS employment.
While the main aim of a pension is to give you an income throughout your retirement, you have the flexibility to take out lump sums whenever you want from the age of 55 – and, in most cases, up to 25% of the total value of your pension can be withdrawn tax free.
For most pension schemes, it is not possible to access your pension until you are at least 55. You can, however, transfer to a new provider at any time. But if you're 55 or older, you can move your pension into your bank account. Even then, though, it is unlikely to be a good idea to take all of your pension in one go.
If your company is in a volatile sector or has financial troubles, it may be worth taking a lump sum. But for most individuals, these are unlikely scenarios. If you have a pension plan, you should also know that it is risky to take a loan from your plan and will probably cost you more in the long term.
This type of plan is one an employer offers its employees and promises them a certain monthly income during retirement. The monthly benefit each employee is promised is based on their years of service with the company and their salary during those years.
In most cases, the lump-sum option is clearly the way to go. The main difference between a lump-sum and a monthly payment is that with a lump-sum option, you get to have control over how your money is invested and what happens to it once you're gone. If that's the case, then the lump-sum option is your best bet.
Can you collect Social Security and a pension at the same time? You can retire with Social Security and a pension at the same time, but the Social Security Administration (SSA) might reduce your Social Security benefit if your pension is from a job at which you did not pay Social Security taxes on your wages.
If you collect your pension early—before age 59½—you may not have to pay the early distribution tax if any of the following apply: You choose to take substantially equal periodic payments. You are at least 55 years old when you leave your job. You become disabled.
The rule of 55 is an IRS rule that allows certain workers to avoid the 10% early withdrawal penalty when taking money out of workplace retirement plans before age 59½. The rule of 55 only applies to workplace plans.
Despite these stringent withdrawal rules, there is a broad array of exceptions to the IRA early withdrawal penalty. These exceptions encompass a diverse range of circ*mstances, including higher education expenses, unreimbursed medical expenses, disability and first-time home purchases, among others.
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