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Cashing in pensions early: when can I access my pension?

Hoping to retire earlier than the State Pension age, or would you rather spend some of the savings in your pension pot while you’re still young? No matter which scenario applies to you, the process of accessing your pensions early is more complex than you may think.
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Ever wondered about the money that’s stashed away in your various pension pots? We wouldn’t be surprised.

In fact, there may be various situations that can leave you thinking, “can I cash in my pension early?” and “how do I actually go about withdrawing my pension?”

Maybe you want to take inspiration from the FIRE Retirement Movement and retire earlier than the State Pension age? Maybe you’ve stumbled across an old pension pot from a job you did many years ago and don’t think you have enough saved to warrant transferring the money into a newer pension?

Alternatively, you might simply want to live life on the wild side. When you’re young, it’s easy to tell yourself that your retirement is too far away to worry about and that you still have plenty of time to save for it – so why not enjoy some of that money now?

I’m going to guess that one of these thoughts may have crossed your mind at some point – otherwise you probably wouldn’t be reading this. But do you know what age you can access your pension? You may assume that because that money is yours, you can cash it in whenever you want. Unfortunately, it’s a little more complicated than that.

With there being plenty of confusion around when you can cash in your savings and if you can access pensions early, we decided to put together a handy guide to tell you everything you need to know.

So, when can I access my pension?

Let’s start with the basics. You can have three types of pensions as a UK resident. These are the State Pension (which you receive from the government), workplace pensions (which are typically arranged by your employers when you start a new job), and a personal pension (which you can set up yourself and have more control over).

Each type of pension has its own rules regarding what age your savings can be accessed – and in the case of workplace pensions and personal pensions, this can differ from provider to provider. We’ll go into more detail on this below.

The State Pension

To refresh, everyone in the UK will have access to the new State Pension if they have paid National Insurance (NI) contributions for at least 10 years (or were getting NI credits for the same amount of time due to illness).1

The age that you can withdraw a State Pension depends on when you were born and is always under review – meaning it could change in future. If you’re unsure when you’ll be entitled to yours, you can use the government’s State Pension age calculator to check.

It’s important to note that it won’t be paid to you automatically. Instead, you’ll receive a letter a few months before you reach State Pension age inviting you to claim your pension. For this reason, you might want to check what age you can get your State Pension.

Workplace pensions

It’s probably safe to assume that if you’ve had multiple jobs over the last couple of years and haven’t taken the time to consolidate your pensions into one, then you’ll have a few workplace pension pots under your belt already. This could make accessing them complicated if you’re unsure of who your past pensions are with, though there are things you can do to find your lost pension pots.

Workplace pensions work a little differently to the State Pension, and there are a few types with varying ages they can be accessed – so it’s worth finding out which ones you have if you’re thinking of retiring soon or simply want to use the money now.

If you have a defined contribution pension, then you can typically start withdrawing your retirement savings – either as a lump sum or as regular payments – when you reach 55. If you have a defined benefit pension, however, the age creeps up 60 or 65. If you are willing to reduce how much you get though, you may be able to receive an income from it at age 55.2

However, one thing to keep in mind is that the minimum pension age is changing from 55 to 57 from 6th April 2028.3

Remember, if you are under 55 and are fed up with having various pensions with different providers – each with their own set of fees – you can transfer them into a personal pension (like Wealthify’s) to help you better keep track of your retirement savings and reduce your fees. Pension transfers are also easier than you think too, and we can help you with this.

Personal pensions

You may not know a lot about personal pensions (which, like a workplace pension, is a type of ‘private pension'), though they are a great way for the self-employed to save for their retirement. Even if you don’t work for yourself and have a pension with your employer, you can still set up a personal pension to supplement it and make your money work harder.

Like workplace pension schemes, personal pensions have a minimum age you need to reach before you start taking money out – although they do offer you more flexibility in terms of how much you put into your pension pot each month. The age you can access a private pension will depend on the provider. This will be 55 in most cases, but again, it is likely to increase to 57 in 2028.3

If you are unsure of what age this will be for your pension, the best thing to do is to contact your provider and ask them.

Can I cash in my pension early?

Whether you can access pensions early is a tricky question to answer as this depends on a myriad of factors such as what type of pension it is, who your pension provider is, what your health is like, and if you’re willing to pay a fee in order to access your money early.

So, let’s explore your options for each type of pension, shall we?

First up, can you access your State Pension early? We’re sorry to say that the simple answer is no.

“But what if I need to retire early due to ill health?”, I hear you ask? If this is the case, don’t worry – you could be entitled to other benefits from the government.

When it comes to workplace and personal pensions, you may also be able to cash in your retirement savings early (without incurring large charges) if you are either seriously ill or have less than a year to live.

But what if you’re not seriously ill?

If you’ve done some searching, then you may have found some companies claiming it is possible to access pensions early and that they can help you do just that – but there is a catch. You see, when you take funds out of a pension before you reach the minimum withdrawal age, these are classed as ‘unauthorised’ payments.

In the majority of cases, accessing your pension savings early is only made possible by transferring your money into another type of pension scheme that allows ‘unauthorised’ payments to be made – but this often results in an eyewatering tax charge. This could be up to 55% of the value withdrawn from your pension.4

Still considering it? Another thing to be wary of is that you are also likely to be charged a fee by the company organising the transfer for you. So, make sure you do your research and only transfer your old pension pots into a new pension with a reputable provider.

What are my options if I still want to retire early?

Now, don’t start thinking that an early retirement isn’t an option for you due to the strict rules around assessing pensions early. All hope isn’t lost. If you have enough saved in your workplace or personal pensions – the majority of which can currently be assessed at age 55 – then you can knock around 10 years off your expected retirement age when it comes to your State Pension.

It’s all about how much you put into your pensions now. It’s simple, really – the more you can afford to transfer in each month, the more you’ll have invested when the time comes to retire. If you’re still in your 20s or 30s, and don’t plan to retire for another 30 to 40 years, upping your pension payments now can make all the difference.

If you’re already paying into a workplace pension, then you’re likely to be contributing the minimum of 5% of your paycheck each month. So, if you can afford to up this amount, your first point of call could be to work out how much you can increase this by and talk to your employer about doing so.

If you don’t have a private pension yet, then this is also something you could consider. These can be paid into alongside your existing workplace pension, and it gives you increased flexibility over how much you pay in – the choice is completely up to you. You’ll also get a 25% tax relief top up, meaning that if you are a basic rate tax payer, every £800 invested in your private pension is worth £1,000. At Wealthify, we automatically calculate this for you and add it to your investment.

Just remember, that your pension annual allowance is £60,000 for the 2024/25. That's the maximum you can pay into a pension before you have to pay tax.

You may not be able to take a lump sum from your pension whenever you wish, but if you’re hoping for an early retirement, then there are things you can do to make your money work harder. Find out more about Wealthify’s Personal Pensions and Pension Transfer services to see how much you could get for your retirement.

The tax treatment depends on your individual circumstances and may be subject to change in the future.

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

Wealthify does not offer financial advice. Seek financial advice if you are unsure about investing.

  1. https://www.gov.uk/new-state-pension
  2. https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/when-can-i-take-money-from-my-pension
  3. https://www.ftadviser.com/pensions/2021/02/12/minimum-pension-age-set-to-increase-to-57-in-2028/
  4. https://www.litrg.org.uk/latest-news/news/201207-thinking-accessing-your-pension-age-55-be-very-careful
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