Taking a Pension at 55: What You Need to Know

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Published on Wednesday, 14 August 2019 11:59

Last Updated on 14 August 2019

Monica Costa

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Some business managers consider taking their pension at 55, but the truth is that it’s not the right choice for everyone. Depending on your circumstances, you may find that it’s best to wait and take your pension at the age of 60 or 65. 

IMPORTANT: One of the most important factors to consider is that taking a pension early could mean that you end up with significantly less capital for your retirement. This is why taking an early pension is not a money making strategy, and should only ever be done after seeking expert financial advice.

Taking an Early Pension: The Options

In the majority of cases, you cannot access your pension until you reach the age of 55. Companies or individuals who suggest otherwise may not be reputable as it is only in very rare circumstances (such as suffering from a critical illness) that someone is able to access their pension money before this age.

 

When you reach 55, however, there are a few different options when it comes to what you can do with your pension. You can take money from a private, personal, or even some workplace schemes, but not from a government or civil service pension. Final salary pensions should be transferred to a personal plan before you can withdraw any funds, but this is usually not recommended as you are giving up a guaranteed lifetime income.

 

If you’re confused about the best course of action to take, make sure you read the following advice from Portafina.

 

Leave Your Pension to Grow

The most common option is to leave it intact where the investments can continue to grow. This will result in a bigger pot of funds for your retirement, but it may be worth reviewing your pension and ensuring your money is being invested in the best available funds.

 

Withdraw Tax-free Cash

If you have a personal or a workplace pension scheme, you may be able to withdraw up to 25% of the fund as tax-free cash, although the limits will vary from pension to pension. It’s important to note that taking cash from a final salary pension will reduce the regular income received in the future.

 

Pension Release 

A pension release is taking money from your pension early and can be done with personal and private pensions as well as lots of workplace schemes. You can take part of the pension, and some pension schemes will allow you to take all of the savings in one go.

 

Pension Drawdown 

Opting for a pension drawdown is choosing to take an income from your pension either as lump sums on an as-needed basis or via a regular payment scheme.

 

Sell Your Pension in Exchange for Regular Income

Selling your pensions to an insurance company in return for a guaranteed and regular income for the rest of your life is called an annuity. You need to find the right scheme for your circumstances and be sure to consider both your future plans, other investments, or savings.

 

Take a look at Portafina’s reviews and get more tips and advice on their social media sites:

Follow them @Portafina on Twitter or watch their videos on the Portafina Channel on YouTube.