Impacts of Early Retirement on your Pensions
If you decide to retire early or stop work because of ill-health, redundancy or other reasons, your pensions may be impacted. It is imperative to know all your pension options to ensure that you have enough to live on when you retire.
Retirement Age and Pension Claim
While you can retire at any age, your state pension can only be claimed if you reach the state pension age. For personal or workplace pensions, you have to check with your scheme providers the earliest age that you can claim pension benefits. In case you are retiring from work due to an ill-health, you may be allowed to get your benefit before the set age. If your health condition is serious and you have less than one year life expectancy you can retire at any age. You will be allowed to take even your entire pension fund as tax-free lump sum.
Early Retirement and State Pension
If you retire before the state pension age, you will need to wait to claim your state pension. It is likely that you get less if you reach state pension age than if you would have continued working. The reason is a state pension plan is obtained by building up enough qualifying years. Such years refer to tax years in which you have sufficient earnings on which you pay National Insurance contributions (NICs).
Early Retirement and Workplace or Personal Pensions
Early retirement may also impact your company or personal pension. The rules for such pensions vary, depending upon who offers them. You will have to check your company or personal pension to know how early retirement can impact your situation. As you look at work place pensions, keep in mind that.
- There is a possibility your workplace scheme will not let you take your pension before the scheme’s normal retirement age.
- If you are made redundant with a pension, you have the option to delay taking it and allow it to build up.
- If you retire early because of ill-health, the scheme rules may have special terms which permit the pension improvement.
- In case you are working again, check the rules on moving your old pension to the pension scheme of your employer.
- When you have many jobs, you will need to have the details of your pension rights.
Because these things are quite complicated, it can be best to get independent advice from professional financial advisers.