Your State Pension age is set by the government and is the age at which you can start receiving an income from the State Pension. This is currently set at 66 for both men and women. Due to a higher life expectancy, the State Pension age is gradually increasing and will be 67 by 2028.
You are not able to withdraw your State Pension early. However, you can withdraw your private and most workplace pensions from the age of 55. From 55 you can take all or some of your tax-free cash, start taking an income, or withdraw your whole pension. If you are thinking of withdrawing your pension early, it’s a good idea to first speak with a financial adviser. This is because releasing pension money early isn’t right for everyone as it will leave you worse off in retirement.
Depending on your retirement plans and any other savings you have, you may decide that you don’t need to start receiving the State Pension as soon as you reach State Pension age. If this is the case, you can defer your pension. This means pushing back the date you start receiving an income until you are ready. And doing so will increase the amount you receive and could make you eligible for a lump sum.
There are two rates for the State Pension and the income you will receive all depends on the National Insurance contributions you have made.
The basic State Pension is currently £156.20 per week and the full State Pension is £203.85 per week (2023-24). To receive the full State Pension you need to have made 35 years’ worth of National Insurance contributions. And if you aren’t quite there yet, you can make additional voluntary contributions to top up what you have already paid.
As well as the State Pension age and the age at which you can start withdrawing your private pensions, there is one more retirement age that it’s good to be aware of.
When you or your employer set up your private pension, a retirement age would have been set either automatically or by yourself. This is a projected age at which you are likely to retire, and you can change this at any time.
This doesn’t mean that you have to take your pension at this age. It simply helps your pension provider to manage your pension in the best way. The money in your pension is invested in the stock market, and different investments have a different level of risk attached to them. When retirement is a long way off, your money is likely to be placed in higher risk investments. This is because when you are younger you can afford to take more risk as, even if there are dips in the market, you will still reap more reward in the longer term. However, the closer you are to retirement, the less appropriate high-risk investments become. So, as you approach your retirement age, your money will be moved into lower risk investments to secure your savings in preparation for retirement.
We can help you make the best possible decisions when it comes to your pensions. We are authorised and regulated by the Financial Conduct Authority.