Taking your pension early is a mistake

A word of advice, don't says Paul Lewis

Published: November 11, 2020 at 2:31 pm

Many older people are losing their jobs or seeing their hours cut because of the coronavirus pandemic. If you are in your 50s, early access to your pension can seem very attractive, but beware. Generally the safest advice about early withdrawal of your pension is – don’t. If you do, take great care. If you work in the public sector, you almost certainly cannot do it. If you work for a company that promises a pension linked to your salary, it is difficult and you should seek regulated independent advice from a qualified financial planner who charges fees.


The easiest pension to access early is one that saves up the money in your own pension pot. It could be a personal pension, sometimes called a SIPP, or a pension you’ve paid into at work called a defined contribution or DC scheme. Auto-enrolment pensions are like this.

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If you are 55 or over, you can take money out of your pension pot. You can take it all or just cash in part of it and keep paying in. If you have more than one pot, then you can cash in some and keep the rest going. You can pay into a pension up to the age of 75, but there are annual limits as low as £4,000.

Normally a quarter of your pension pot will be tax-free and you can just take that out. If you take more, then the amount above the tax-free part will be added to your income and taxed by the pension provider before you see it. The rules make them deduct too much tax. You can claim back the overpaid amount on a form called P53 from gov.uk. Or you can wait until the next tax year when the Revenue should sort out the figures and give you a rebate.

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Think hard before you take money from your pension. It is for your retirement. When it’s gone, it’s gone and your old age will be poorer. Get advice from:

Paul Lewis presents Money Box on Radio 4



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