Take Pension Early

To take pension early is a process known as pension release whereby the benefits available to you from your pension may be taken before your retirement date.

To take pension early you must be aged 55 or over, have access to a relevant UK pension and not have already taken the benefits available to you. You may not take pension early from a State Pension.

When you take pension early the benefits accorded to you may allow you to take up to 25% of your pension fund as a tax free cash lump sum. The residual amount may then either be reinvested or used to provide an income either from an annuity or directly from your pension.

An annuity provides a guaranteed income for life that is fixed at the time of purchase and is designed to provide for you in retirement.. Income drawdown is an alternative to an annuity that when you take pension early that allows you to either continue to grow your pension or to take an income direct from it without requiring you to purchase an annuity. Income drawdown will provide you with more flexibility and control on your income as you can vary it each year; however, without careful management it is possible that you could use up the total value of your pension before your need for an income ends if your pension doesn’t grow by a sufficient amount.

Note: Releasing your pension benefits early could reduce your income at retirement and therefore is only suitable for a limited number of people and circumstances. The above is based on our understanding of current legislation and tax rules and are subject to change by the government. Tax reliefs referred to are those currently applying. Please note the value of investments can go down in value as well as up and you may get back less than you invest.