• Mon. Aug 2nd, 2021

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Your Pension Options Will Change At 55

Here is the good news: things get much more interesting with your pension pot when you hit the age of 55. Now that really is something both to look forward to and plan for as you step nearer to your retirement.

Because of the pension freedoms, first introduced by the government back in 2015, you are now able to withdraw as much of your retirement savings as you like after the age of 55, just as long as you have a qualifying pension scheme. This means you have greater flexibility, more than ever before with how you use your savings as you reach your retirement.

You could decide to use some of your savings to tackle an immediate financial issue. Whereas on the other hand, this is actual money you have saved to provide you with an income when you wave goodbye to your job. It is worth remembering that by taking pension money out early may leave you with a smaller income in your retirement. The key is to compare both sides and decide what you need now against what you might need in the future.

That is quite the balancing act! Let us see how it can all be done and look at the options that are available to you.

Retirement Times Are A Changing

We are certainly living in strange times: on one hand the government has pushed the official retirement age further away – whilst on the other hand, we’re now allowed to use pension savings earlier than before. Just what is going on?

Well, in a nut shell, the official retirement age is gradually being pushed back because we’re all living longer, and generally a good deal healthier. So, we are able to work longer and also enjoy a longer and active retirement. This also means that any money we put aside for our retirement years needs to last much longer and work harder for us.

Enter Pension Freedoms

To support all of these changes, we now have pension freedoms. Rather than waiting until our 60s, we can access these savings we have made at any time after the age of 55 (as long as you have an eligible scheme). By accessing correctly, you can ease any financial burdens or improve your living standards in the last stretch up to retirement.

However, it is crucial to remember that you will definitely need those savings to look after you financially throughout your later years, so you must be careful with how you go about your pension freedom options. You will need the help of a professional advice from a regulated financial adviser.

What Are My Pension Options?

Ok, so you’ve hit 55 years of age and the idea of retiring is now on the horizon. The specific date could be some time off though and we’re all looking for that little bit of extra financial help to carry us through tougher times, or as a treat when we need it.

So, What Are The Benefits And How Does It All Work?

Let’s take a look at your basic options:

Tax Free Cash

It may simply be that you need some extra money to buy the new car you have always promised yourself. Or perhaps you need a small amount of cash to pay towards your son or daughters dream house. Regardless of the reason, the great news is that with an eligible scheme, you can now take out  up to 25% of your pension pot totally tax-free, once you reach 55.  The money that stays in your pot will continue to be reinvested by your pension provider.

Pension Release

When you take money out of your pension, this is called Pension release – and you can withdraw money from your pension as many times as you like. Always keep in mind that only the initial 25% is tax free. After this amount, any savings you access from your pension pot will be considered as income by HMRC – and therefore taxed at the relevant rate. You should work closely with a regulated financial adviser to make sure you are not jeopardising your future savings and you are receiving the maximum benefit from your savings.


Another option is to withdraw money from your pension pot in the form of a regular ongoing income. The first 25% would of course still be considered tax-free. This method may prove to be a very effective way to bolster your income in later life or a way to reduce your workload as you move into your retirement years.

Is everyone above the age of 55 eligible for pension freedoms?

When you reach 55 years of age, you may access your pension savings, only if you have a pension which allows you to do this. Which are – personal or private pensions, company pensions or a final salary pension. You can not access unfunded pensions or your state pension. In cases where access to pensions isn’t permitted, this can be offset by considering other pension funds which could offer the same benefits and level of access. In other words, it could be far more beneficial to transfer your savings to a more flexible pension fund.

Peace Of Mind

Your pension pot originally was put in place to provide you with financial peace of mind and greater flexibility in your post-work years. The notion that early access to these savings could free you up of your current financial issues can be very teasing. But trying to tackle the complex world of pensions yourself can be a bit of a massive minefield. You should strike a healthy balance between maintaining your future savings pot and working through difficult financial decisions in the present. This is why the help of a regulated retirement financial adviser is imperative.

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