Are you eligible for pension release?

Taking money from your pension early all depends on your circumstances and the type of pension scheme you have. We have put together a guide to help you find out if you are eligible to release money from your pension from the age of 55. It contains some of the key facts and information you need to consider, including answers to some of the most common questions asked.

The headline facts at a glance

As long as you are 55 or over and have the right kind of pension, you can take money from it. The amount you withdraw is completely up to you and the first 25% is tax free. As you might have guessed, the rest is taxable as income. It is worth mentioning that taking money from your pension in this way is often referred to as pension access or pension release.

Are you eligible for pension release?

Why are so many people taking money from their pension early?

Thousands of people across the UK are taking money from their pension pot early to tackle a current pressing need or opportunity. In our experience some of the most common reasons include:

  • Tackling a long-standing financial commitment such as a mortgage, loan or credit card.
  • Supporting a family member with a big life event such as a wedding or deposit.
  • Making important upgrades to the house.

These are just a few examples and you might have a completely different reason for wanting to take money early from your pension. The big thing to consider is the impact this could have on your life further down the line.

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Is taking money from your pension the right thing for you to do?

To answer this question, you first need to balance the importance of what you currently need with what you might need in the future.

Taking money from your pension now could reduce your income later in life and therefore affect the way you live when it is time to retire. On the flip slide, for many people considering this option, resolving their current need can have a lasting positive impact on their future.

It is not an easy decision to make. And that is why many people seek advice from a regulated, independent financial adviser. Someone who knows pensions inside out and who will do all the hard work for you.

How do you take money from your pension early?

This all depends on the type of pension, or pensions, that you have. Sometimes you can make the arrangements direct with your provider. In many cases, though, you must take financial advice before withdrawing any money early from your pension. This regulation is in place to protect people as, depending on your circumstances, transferring out of certain schemes might not always be in your best interests.

We have already helped thousands of clients to withdraw the money they need. And for many others we have recommended they are best off leaving their pension savings exactly where they are. The great thing is it costs you nothing to find out which option we believe is right for you.

You can take the first 25% of your pension pot tax free. Any withdrawals after that, you will need to pay tax on. The amount of tax you pay depends on the tax bracket you fall into. This is dependent on the total of all your income sources, including any money you take from your pension.

Are you eligible for pension release?

Can I release money from my pension if I am under 55?

Generally, you must be 55 or over to release money from your pension. In very rare circumstances, such as extremely poor health, you may be able to take money from your pension before you are 55.

Can I take money early from all types of pensions?

You can take money from any private pension and most employee schemes. To access a final salary (also known as defined benefit) scheme, you may need to first transfer your funds to a personal scheme. You cannot use pension release to take money early from the state pension or unfunded public sector schemes, which cover organisations and professions including the NHS, teachers, armed forces, civil servants, firefighters and the police.

Is there a cut-off age, after which I cannot take money from my pension?

No, as long as your savings are in a pension scheme that allows you complete access then you can take money from your pension whenever you want to.

Are you eligible for pension release?

Am I going to have to pay the tax man?

You can take the first 25% of your pension pot tax free. After that withdrawals are taxed. The amount you are taxed depends on which tax bracket you fall into once all of your income sources, including any money that you take from your pension, have been added up.

What will it cost me?

Aside from any tax that you might have to pay, most companies will charge you to arrange and manage any withdrawals of money from your pension pot. Many adviser firms will also charge a fee to review your circumstances and make a recommendation for your pension. Others will only charge a fee if you ask them to act on their recommendation. This fee will usually come out of your pension, so you won’t have to worry about finding any extra cash to cover it.

When do I have to seek financial advice before taking money early from my pension?

If you have built up more than £30,000 worth of contributions into either a company final salary pension (also known as defined benefit schemes), or a pension with a guaranteed annuity rate, then you must take advice before withdrawing any money early.

A quick reminder that the tax you pay depends very much on the current rules and your personal circumstances, and so could change in the future.

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