As you begin to reach your fifties, it’s normal to begin thinking about the pension pot you’ve been building over the years. If you are, then you will find the advice that Portafina has put together extremely useful, as they map out what your options are.
Taking Out Pensions at 55
It is important to note that in most cases, you can’t take out pensions before the age of fifty-five. However, if you are at that age or beyond, there are a number of options available to you depending on what scheme you’re on. See your options below:
For those who want a sense of stability as they age, opting to buy an annuity could give them just that. This is where you sell your pension pot to an insurance company in exchange for a regular income for life. Make a note, however, that the rates of annuities have dropped in the past ten years and they can be somewhat inflexible.
One Large Sum
For those who may want to take out their money all in one, then this is something you could do aged fifty-five. Although it’s advisable that you keep at least a portion of it invested for longer, you can take it all if you need to.
Some people opt to take a regular income from their pensions and this is known as pension drawdown. It could be done by you receiving regular payments or taking lump sums out when needed.
Taking money from your pension at the age of fifty-five would be classified as pension release as it’s considered early. You can typically withdraw from private or workplace schemes if needs be. With this said however, if you have a final salary scheme you’d need to transfer it to a personal pension first which could, unfortunately, leave you at a loss.
It is possible to withdraw tax-free cash from your pension. Workplace and personal pension schemes tend to limit the amount you can take out to 25%. It does vary depending on your scheme and in some cases, taking tax-free cash could affect the amount of guaranteed income you receive from final salary pensions.
Waiting Beyond 55
You don’t have to take out money at fifty-five, as the option to wait until you’re in your sixties is also there. Taking money early could mean that you have less to live on in the future, so be sure to be careful. Waiting may even be more favorable as your pension pot has more time to grow, especially if your savings are invested in the right funds.
Taking Out Pensions Before 55
As briefly mentioned above, it is crucial you know that most of the time, you can’t take money from your pension before you turn fifty-five. The only exception to the rule hinges on being faced with a critical illness.