The earliest age your pension can be taken will depend on at least one of the following:
- The rules set in law.
- Your health.
- The individual pension scheme rules.
Different types of pension will have different minimum ages at which your pension can be taken.
Understanding the earliest age your pension can be taken can mean the difference between leaving work early or staying on longer than you needed to.
The earliest age your pension can be taken will depend on the pension
Essentially there are three different types of pension:
- State Pension.
- Personal pension.
- Workplace pension.
Let’s look at the earliest pension age for each.
State Pension
The earliest age you can start to receive the State Pension is at your State Pension Age. There is no ability to take it before.
It used to be so simple. The State Pension Age was 65 for men and 60 for women.
Over the last few years the State Pension Age has been changing. For men and women it is now 65 and increasing for both to 66 by October 2020.
Further increases are scheduled to rise to 67 between 2026 and 2028 and then possibly to 68 between 2037 and 2039.
Thankfully the government have produced this simple State Pension Age calculator that shows you the earliest age your State Pension can be taken.
Personal pension
Usually for a defined contribution personal pension like a Self-Invested Personal Pension (SIPP) the earliest age you can take it is 55.
You may be able to take your pension earlier than this if you suffer from ill health and you may be able to take the entire pension as a lump sum if you are terminally ill.
The exact process and rules for determining ill health will depend on your pension provider and they should be able to assist you if you are unsure.
BEWARE: There are pension scamming companies out there that will offer you the ability to release your pension cash earlier than age 55 even if you are perfectly healthy.
This is known as an unauthorised payment and you could be subject to tax at 55% on the withdrawal, meaning you lose a good chunk of your pension fund. If you become aware of a scam please let us know as we can report this to the regulator.
Workplace pension
The earliest age your workplace pension can be taken will also be 55 unless you suffer from ill health.
But the impacts of taking your pension early will differ depending on the type of pension you have.
If you take a defined contribution pension early then it will usually mean leaving the scheme and missing out on future pension payments from your employer if you continue to work.
If you take a defined benefit pension like the NHS pension early then the income you are ‘guaranteed’ in retirement will be reduced to reflect the fact you are taking it earlier and for longer.
Things to consider when looking at the earliest age your pension can be taken
Knowing that you can take your pension before age 65 or 60 is useful because it means you have more flexibility in how you plan for your retirement.
Many clients we work with plan to do more spending in the early years of their retirement. Things like travelling, eating out and helping out the kids.
They then plan to reduce spending as they get older and don’t travel as much, only need one car and their children are self-sufficient.
Even if you enjoy your work but would prefer some more time, taking your pension early could mean you reduce your hours and go part time.
This all needs to be balanced with the fact we are living longer and your pension will probably need to last for longer than you think. Taking your pension too early without the knowledge of how this will impact your finances later down the line could mean your pension runs out before you!
If you would like us to carry out a complimentary portfolio analysis of your pension including performance and charges then please secure a 15-minute video call with us. You can speak to a Chartered Financial Planner who will listen to your situation, give you an outline of what you need to consider and guide you in the right direction. At the end of the process you will receive a Portfolio Report.
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
