FAQ - When can I take money from my pension?


FAQ - When can I take money from my pension?

The earliest you can start taking money from your pension is 55 years old.

You can use these funds to help supplement your salary, allowing you to work less hours, or if your pension is significant enough, to retire.

When is right time to take my pension?

The Pension Freedom rules brought in during 2015 give you the right to take your pension fund from 55; but that does not necessarily mean that taking the money then will be a good idea.

Very few people will be able to retire that early as often will lack the financial resources to survive until State Pension Age without any other income. The State Pension Age has increased for many people - it is a good idea to know what yours is to help inform your retirement planning. You can check your State Pension Age at the www.gov.uk site here.

No one knows exactly how many years of retirement they are likely to have, but the majority of the population should survive well into their 80s. There are people alive today who are likely to live well past their 110th birthday, without troubling the record books. For the majority, taking pension income over a period of time will be essential, but when and how much will always be a matter for consideration and advice.

Pension Freedom has revolutionised the mechanism for regular income, with annuities now being the minority choice and drawdown no longer being confined to the wealthy. Retirees using flexi-access drawdown are not pensioners, receiving a fixed, but certain income every month, they are investors, living off their investments, with new challenges and opportunities.

Taking money from your pension – your options

The Pension Freedom rules now mean you can now ‘mix and match’ any of the options below when you are deciding how to take money from your pension pots. You could:

  • Leave it untouched

  • Buy a guaranteed income (an annuity)

  • Use your pot to buy an adjustable income (a flexi-access drawdown pension)

  • Take small lump sums

  • Take your whole pot as cash

 It’s important that you understand the benefits and drawbacks of each option, so you don’t run out of money too soon, or create a larger tax bill than you were expecting. Getting professional independent financial advice when you are making these choices can help you plan carefully and choose the best option, or mix of options, for your circumstances.

Pensions and their tax treatment
When you come to take your pension, you will have the option of taking a ‘pension commencement lump sum’. This is an amount of up to 25% of the fund, which is tax free.

The remaining fund is taxed as earned income when you take it. It is added to the rest of your other income for the tax year and subject to income tax at normal rates.

How can I get professional advice on my Pensions and Retirement Planning?

Please contact us at info@martin-redmanpartners.co.uk or call us on 01223 792 196 to arrange an initial appointment, at no cost to yourself, with one of our Independent Financial Advisers.

About Martin-Redman Partners

We are a team of experienced Independent Financial Advisers who can advise on your personal or business financial arrangements. We have been building trusted relationships with clients for many years by articulating clear and tailored recommendations in areas ranging from investments to retirement planning, to complex estate planning advice.

The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of UK legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly, no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.