2. Personal and workplace pensions

When you get your personal or workplace pension

When you can get your pension will depend on your pension scheme’s rules, but it’s usually after you’re 55.

You may be able to take your pension before this age if either:

  • you’re retiring early because of ill health
  • you had the right under the scheme you joined before 6 April 2006 to take your pension before you’re 55 – ask your pension provider if you’re not sure

Some companies offer to help you take your pension early or get more than 25% of it as a lump sum. These may be unauthorised payments and you can pay up to 55% tax on these.

If you have serious ill health

You may not have to pay tax on your pension fund if you have serious ill health and have less than a year’s life expectancy.

Some pension funds will keep at least 50% of your pension to provide a pension for your spouse or civil partner.

Defined contribution pension schemes

These are also known as ‘money purchase schemes’.

Your pension pot is put into various types of investments, eg shares. The amount in your pension pot at retirement is based on how much has been paid in and how well the investments have performed.

Your pension will be smaller if you retire early. This is because:

  • you’ve had fewer years to pay into your pension
  • your pension will need to last longer

You have different options for how your pension is paid.

Defined benefit pension schemes

These are a type of workplace pension and are sometimes also called ‘final salary’ or ‘career average’ earnings-related pension schemes.

The amount you get at retirement is based on a number of things, eg your earnings and how long you’ve been a member of the scheme.

In most schemes, when you retire you can take some of your pension as a tax-free lump sum. The rest you get as a regular income, on which you might pay tax.

If you’re considering early retirement you’ll probably get a smaller pension.