Pension savings can be accessed before age 55 under these conditions – rules explained
State pension payments can only be received once a person reaches their state pension age which is currently sitting between 65 and 66. However, there is a lot more freedom in how private pensions can be accessed and retirees can tap into them from age 55.
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Usually, if a person tries to access their pensions before turning 55 they’ll likely face severe penalties.
If a person gets any payments from a private pension before turning 55 if will likely count as an “unauthorised payment”.
Unauthorised payments are those that are made outside of the UKs tax laws and there are many examples of them.
Anyone who accesses their pots before turning 55 could induce a tax charge of 55 percent.
The government and other public bodies warn that if a company or individual approaches a retiree with the promise of legal early access, it will likely be a scam.
However, there are some instances where a person may be allowed to access their pensions before turning 55 without incurring any problems.
The first instance concerns the retiree’s health.
If a person is too ill to work or if they have a serious illness which means they’re expected to live for less than a year, they may be able to access their pension early.
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The Money Advice Service warns that a third party is not needed for this and the person should just contact the pension provider themselves.
They will then be able to explain how the process works and determine if the person is eligible.
A person could also access their retirement money early if they have a “protected retirement date”.
This date will be specified in the pension plan itself and it must have been granted before April 6 2006 to be applicable.
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Only certain people would have been offered this option, such as professional sport people.
Once a person does reach 55 and wants to access their pensions normally, they’ll likely have many options available to them.
In most cases, retirees will be able to take up to 25 percent of their pension pot tax free.
Once that occurs, a person will have six months to decide what to do with the remainder.
According to Pension Wise, a government run pension advisory service, people can take the following actions with their pots, with plenty of variation within the options themselves:
- Leave the pot untouched
- Get a guaranteed income in the form of an annuity
- Get an adjustable income
- Take the cash in chunks
- Take the whole pot
- Mix the options
It should be noted that accessing a pension in any way will likely trigger a tax charge but Pension Wise provide guidance on all of this on their website.
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