Accessing pension funds
If you qualify for the State Pension and have also paid into a workplace pension over the course of your career, you’ll be able to access each fund at a different age. The State Pension age is fixed by the government and you’re unable to withdraw a weekly pension until you reach it. The State Pension age is currently 66 for men and women, and looks set to increase to 67 by 2028.
It’s possible to access a workplace or personal pension much earlier. Once you reach your 55th birthday (57 from 2028) you can withdraw all of your pension fund. You can take up to 25% as a lump sum without paying tax, and will be charged at your usual rate for any subsequent withdrawals. You can use all of the money to buy an annuity, which will pay out a guaranteed income for the rest of your life, or reinvest your pension fund so it can provide you with income as you require it.
How drawdown works
Drawdown is the most flexible way to access the money in your pension, and is the main alternative to buying an annuity. You have the freedom to move your money into different funds and can withdraw as much or as little as you like, at any time.
When you reinvest your pension, which typically goes into a combination of shares, cash and bonds, the amount you receive can vary depending on the fund’s performance. While releasing money from pensions is relatively straightforward with drawdown, there’s no guarantee that your money will last forever. Funds are vulnerable to market performance so the size of your pot can go down as well as up, and you may get back less than you started with.
However, if you opt for drawdown and change your mind it’s possible to use your pension fund to buy an annuity at a later date. If you purchase an annuity there’s no going back.
How to withdraw money from pension funds
Before drawing money from your pension funds you’ll need to consider the benefits and disadvantages and ensure you have a comprehensive plan in place.
Drawdown is simple with PensionBee. Our service combines all of your old pensions into one easy to manage online plan. Funds are managed by the biggest global investment firms such as BlackRock, State Street Global Advisors, HSBC and Legal & General.
You’ll be able to track how your funds are performing through an online dashboard and once you reach 55 (57 from 2028) you can access your money in just a few simple steps. As long as there are no issues verifying your bank details, it will take around 10 working days for you to receive your money.
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
Last edited: 05-03-2021