When can I retire?


'Retirement' is defined as a watershed point in our lives when we choose to leave the workforce. 'When can I retire?' is a question we've probably all asked ourselves at some point in time.

However, this should really be split into two questions:

What age can I retire?

There's no hard and fast rules governing when we can or can't do this. However, most retirements are funded by a pension - and the current rules allow you to draw on your personal pension savings from age 55.

How much do I need to retire?

Just exactly when we are able to retire will always depend on if we have enough funds in place to live on. There's no doubt that the earlier you start planning the more time you'll have to build your savings and make adjustments.

You can use our retirement budget planner to help you understand your income sources and expenditure throughout retirement.

There are several ways to fund your retirement, but for many it will include the State Pension, and your own private pension provision.

 

1. The State Pension

The State Pension is provided by the Government and pays you a regular income in retirement.

Until fairly recently, the age that people could claim their State Pension remained constant at 65 for men and 60 for women.

But that's all changing now. As we are all living longer, the Government has decided that the State Pension age will need to change in the future. 

It is envisaged that from 2020, both men and women's State Pension ages will have increased to 66. Then, between 2026 and 2028 they will have increased again to 67. After that further increases are likely to be linked to future average life expectancy figures.

And on top of these age thresholds, the Government will review the State Pension situation every five years regardless of the above changes.

Who is eligible for a State Pension?

Not everyone is entitled to the UK full State Pension. Eligibility depends upon certain criteria being met.

If you reached State Pension age before 6 April 2016, you will have qualified under the old basic State Pension rules.

This means you must have worked in the UK and have made National Insurance contributions (or an equivalent) for 30 years or have paid voluntary contributions to receive the full basic State Pension.

If you reach State Pension age on, or after 6 April 2016, then you will qualify under the new State Pension rules, which means you'll usually need at least ten qualifying years on your National Insurance record to get any State Pension, and 35 qualifying years to get the full new State Pension.

If you have between ten and 35 qualifying years, you'll receive a proportion of the new State Pension.

If you are unsure what this means for you, then you can get more detailed information here

When can I begin to receive a State Pension?

The exact date that you get your State Pension will depend on your date of birth. You can work out your State Pension age using the State Pension calculator.

Currently the State Pension age for men is 65.  However since 2010 the State Pension age for women (the age when they can receive their State Pension) has been changing to bring it in line with the male State Pension age of 65. 

By December 2018 the State Pension age will have risen to 65 for women, and by October 2020 the State Pension age for both men and women will have risen to 66.

Of course that's not to say you have to retire at your State Pension age. You can defer your retirement and delay taking your State Pension if you wish. Read more about delaying your retirement.

 

2. Other pensions

Defined Contribution

A defined contribution pension (sometimes referred to as a 'personal pension' or 'money purchase' scheme) is a pension scheme that you can arrange yourself. Or you may have a workplace pension that you (and possibly your employer) will contribute into. The size of your pension pot is largely based on how much you pay in, as well as how your fund performs.

Defined Benefit

A defined benefit pension scheme (sometimes called a 'final salary' pension scheme) is one that is set up by your employer, and guarantees to pay out an income at a set age based on how much the retiree earned and how long they were in the scheme.  These types of scheme can be expensive to run, and are becoming increasingly rare. 

When can I begin to receive my personal pension?

For defined contribution pensions, you can access your pension pot from age 55. But it's worth finding out if you have a 'normal' (NRA) or 'selected' (SRA) retirement age as if you do, and you access your pension plan before this date you may incur an early exit penalty.

How will my pension be paid?

If you have a defined contribution pension, you can now take your benefits however you want. But you need to make a choice as the pension plan doesn't usually pay out automatically.

You can choose to:

  • buy a guaranteed income for life
  • take income from a drawdown plan
  • take a lump sum directly from "uncrystallised funds"
  • create a solution for yourself that combines some of those options, or
  • defer - just because you've reached the right age, doesn't mean you have to take your benefits right away.

There are pros and cons to each of these options, including potential tax issues. Click here to find out more about the options available