When can I access my pension?

Many of us start saving into a pension from the age of 22 or even earlier. This is the age from which your employer usually has to automatically enrol you into a pension scheme. If you choose to pay into a pension, then your employer also has to chip in with their own contributions.

It’s natural that as you start to approach retirement you will want to know when you can access this retirement nest egg.

You can access your pension pot from age 55 – this is called the normal minimum pension age. This is rising to age 57 from April 2028, which is also the date the state pension age increases to age 67 for both men and women.  

You don’t have to stop working to access your pension. But be careful – some pension providers won’t let you take money out of your pension pot as the same time as continuing to pay into your pension, and you may not want to stop contributing.

Some workplace pensions may refer to a pension age of, say, 65 or 67. However, you can still access your pension from age 55. If you do, usually there will be no additional charges. But if you have a defined benefit pension – one that is based on how long you have worked with your employer and your salary – then there may be a penalty if you want to take your pension early.

What choices do I have?

You can take up to a quarter of your pension pot as a tax-free lump sum. If you take over £268,275 from all your pensions in your lifetime, any excess is taxed.

You can either move the remainder to drawdown or use it to buy an annuity, which pays out a guaranteed income for life.

Under drawdown, you can withdraw how much you want, any time you want, or leave it untouched. Any income you take will be taxed like earnings.

You don’t have to take your whole pension pot; you can take a small portion of it and keep the rest invested.

The allure of tax-free cash

Some people decide they want to take their tax-free cash out of their pension when they reach their late 50s or early 60s.

There may be very good reasons why – to repay debt or to meet specific costs. But if you don’t have any definite plans on how you want to spend the tax-free cash, or if you don’t immediately need an income from your pension, you may want to leave your pension until later. The generous tax treatment pensions get means your money should grow quicker in a pension wrapper than if you took it out and invested it elsewhere.

What age do I have to access my pension by?

There is no final age you have to access your pension by.

Obviously, the longer you leave your pension then the longer it can benefit from the generous tax advantages of pensions.

If you plan to buy an annuity – a guaranteed income for life – then the older you are the higher the income you will be able to secure.

However, most people access their pension by the age of 75. This is the age when you stop getting tax relief on your pension contributions and so many providers don’t accept them beyond 75.

Also, if you die after the age of 75, then any unused pension can pass to your family, but they will have to pay income tax on when they take the money. If you haven’t yet taken your tax-free cash, then this tax-free element will be lost.

Getting help

Deciding when to access your pension, and what to do with it can be complicated.

You can get in touch with a regulated financial adviser who can help you make these decisions, or the Government’s free guidance service – Pension Wise – who can talk you through your options.