Can I Take Money From My Pension Before I Retire?

Ask the Expert

I am now 65, but I’m not planning on retiring for another few years. However, I am hoping to help my son buy a bigger house. I have a few pension pots, so could I use some of my pension to help my son?

Carl responds:

You can indeed access your pensions – this is generally allowable after age 55, and you can take the whole fund in one go, or you can take smaller amounts as and when needed, or you can draw a regular income.

Given your circumstances, it seems unlikely that you would want to draw income in addition to your salary.  Therefore, this reply focuses on your options for taking lump sums only through the income drawdown route.

You can usually take up to 25% tax-free.  For example, if your pot is worth £60,000, you will get £15,000 tax-free, and you can take this in one go or gradually.  The remaining £45,000 will be treated as income, meaning you will pay income tax on it.

If you take income in excess of the tax-free lump sum, your annual allowance for tax-relievable contributions reduces to £4,000 a year. Any taxable money you take from your pension will be added to your total income for that year and taxed at the relevant income tax rate. This may take you into a higher tax bracket than normal.

Before deciding on taking lump sums from your pension, it is important to consider what income you will need in retirement to live your desired lifestyle. You will also need to think about when you would like to retire, as this may impact how much income you will need in retirement.

Retirement planning can be a complicated area, and I would recommend seeking independent financial advice before making any decisions. An Independent Financial Adviser can work with you to define your goals and create a plan to achieve them. Your adviser will want to know all about you – financially and personally – so that they can give the best advice that is right for you.

Any opinions expressed in this article do not constitute advice and are based on our understanding of current taxation, legislation, and HMRC practice which may be subject to change.