When you start talking about pensions, people often respond with confusion. And that’s understandable. Pensions can be a complicated topic. There are so many questions, such as; how often can you access them and how much can you take? Here at Portafina, we are dedicated to making pensions as simple as possible. So, here’s what you need to know about your pension options at 55.

How You Can Use Your Pension

There are so many things you can do with your pension from the age of 55. Just come of the options include; releasing some or all of your savings to draw a regular income, leaving your pension as it is, or selling your pension to an insurance company in return for a guaranteed income for life. The choice is yours.

So, what’s the right option for you? Here at Portafina we know that most people want to know the best option for their personal circumstances. However, this depends very much on your current lifestyle, your plans for the future, and any other savings or investments you have. What you need to know is that in almost all cases, you cannot take money out of your pension before you reach the age of 55.

Remember: taking money from your pension does mean you will have a lot less to live on in the future. So, using your pension early should not be seen as an easy way to get money fast. Although it may make sense at the time, as with any important decision, it is important to get professional advice.

Is a Pension Tax-Free Cash?

While you can withdraw specific amounts of cash from your pension tax free, for some personal and workplace schemes, the limit is set at 25%. For other schemes, the limit is different and taking tax-free cash could affect the amount of guaranteed income you will receive from your final salary pension.

What is a Pension Release?

Pension release basically means taking the money out from your pension early (but not before you’re 55). After you turn 55, you can release all money from personal pensions, private pensions, and many workplace schemes. However, if you have a final salary scheme, you will need to transfer it to a personal pension before you can release any money. And it is important you realise that making this decision could mean you’re giving up a valuable and guaranteed income for life.

What is Pension Drawdown?

If you go into a pension drawdown it basically means you are taking income from your personal pension scheme. This can be taken in payments that suit you best, so either as regular payments or lump sums. The great things about a pension drawdown is that you can release your pension in the amounts you need, when you need it.

Claiming All Your Pension at Once

With the right pension scheme in place, you could choose to take all your savings in one go from the age of 55. Of course, this decision isn’t right for every one. So, whether it’s the right things to do for you or not depends on your personal circumstances. In most cases, we at Portafina recommend that the best option is to keep some or all of your pension savings invested for another few years.

Buying an Annuity

If you want the security and peace of mind of a regular income for life, then buying an annuity may be the best option for you. An annuity is when you sell your pension pot to an insurance company and in return they provide you a regular income for the rest of your life.
While the security of buying an annuity may be an appealing option for you, it is important you know that annuity’s have dropped in popularity over the last decade due to how inflexible they are and the sharp decline in rates.

Pensions You Can Access from 55

As we have already discussed, generally you cannot take money out of your pension before the age of 55. What’s more, if an individual or even a company says that you can, be careful as this could be a scam. It is only in very rare circumstances that an individual is allowed to release their pension before they reach 55, such as critical illness. So, if you are unsure at any point, always seek the advice of experts like the ones we have at Portafina.

Leaving Your Pension to Increase

Just because you turn 55 does not mean you have to take money from your pension. In fact, leaving your pension invested in savings could be far more beneficial for you, significantly affecting the size of your pot by the time you reach your 60s.
If you do decide to leave your pension to increase in value for a few more years, you want to make sure they are invested in the best possible place for you. That’s why we highly recommend you regularly review your pension pot.

Got Questions About Your Pension?

If you have any questions about pension pots and you want some advice, you can get tips and advice on our social media sites: @Portafina on twitter or on our Portafina YouTube Channel. Find out more about our services and how we can help by checking out our Portafina reviews.

Categories: Finance


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