Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

Pensions and retiring: frequently asked questions

Pension rules and regulations are complex and frequently change. Here are some common questions our financial advisers are asked about retirement.

Can I retire at 60 and claim the state pension?

You can retire at any age; however, you cannot claim the state pension until you reach state pension age. The state pension age is rising and will increase for both men and women to age 66 by October 2020. Further increases to the state pension age will happen between 2026 and 2028.

The current maximum state pension is £168.60 per week (2019/20 tax year), which for most people is unlikely to be enough for them to maintain their current lifestyle. Our financial advisers recommend that you save into an additional pension to supplement the state pension. You can currently access private pensions from the state pension age of 55.

Find out more about starting a pension

At what age can I retire?

You can retire at any age. However, you cannot access a private pension until the age of 55, rising to age 57 from 2028.

At Four Wealth Management, your financial adviser will work with you to help determine what age you can retire and how much income you think you will need from your pension pot to live comfortably.

Find out more about retirement planning

Can I take my pension at 55 and still work?

Yes, you can take income or a tax-free lump sum of up to 25% from your private pension when you reach age 55 and continue to work.

You can use money from your pension to top up your salary or to allow you to work less hours.

You can then continue to contribute to your pension while you are working to help your pension pot continue to grow.

Please note that if you flexibly access one of your defined contribution schemes (e.g. taking a taxable withdrawal from flexi-access drawdown), you will trigger the money purchase annual allowance and your defined contribution pension contributions (from you and your employer) will thereafter be limited to £4,000 for the 2019/20 tax year.

Review Your Finances with Four Wealth Management

How much pension do I need to retire at 55?

The amount that you need in your pension pot to retire at 55 depends on your individual circumstances. A common estimate is that you will need 70% of your final working income to maintain the lifestyle you want when you retire. If you retire on a salary of £50,000, you are likely to need £35,000 per year from your pension pot to maintain your lifestyle.

This rule may not apply to everyone, for some they may feel that they need less income and others may need more. At Four Wealth Management, your financial adviser will work with you to determine how much income you will need from your pension pot. They will also review your current expenditure and help create a realistic retirement budget for you.

Delaying your retirement gives your pension pot more potential to grow and means you may choose to take more income each month as the pension pot does not need to last you as long.

Find out more about retirement planning

At what age will I stop paying National Insurance?

If you are employed or self-employed, you stop paying National Insurance when you reach the state pension age. The state pension age is increasing to 66 in 2020.

What happens when I decide I want to start getting income from my pension?

Depending on the type of pension plan you have, there are three main ways to withdraw money from your pension:

1. Take some of it as cash – you can usually have up to 25% of your pension paid to you as a lump sum tax free.

2. Get flexible access to your pension – take the income you need, when you need it.

3. Buy a guaranteed income – you can your use pension pot to buy an annuity to provide you with guaranteed income for the rest of your life.

Find out more about your retirement options

When should I start saving for retirement?

It is a good idea to start a pension as soon as you can. This means you’ll have as long as possible to save for retirement and your fund has more potential to grow. You can start by saving small amounts monthly. If your income improves, you can increase your pension contribution.

Find out more about starting a pension

Can I pay a lump sum into my pension?

Yes, you can open a pension with a lump sum or contribute a lump sum to an existing pension at any time.

How does tax relief on pensions work?

Tax relief on individual contributions is limited to 100% of your relevant UK earnings e.g. salary, bonuses, overtime, profit from self-employment, usually up to a maximum of £40,000 per annum. If you are a member of an occupational pension scheme then generally speaking tax relief is granted by way of a deduction of a gross pension contribution from your gross pay.

If you are a member of an individual plan (e.g. stakeholder pension, personal pension, SIPP or the group versions of these schemes) then you pay in 80% of the amount you want to end up in the pension and within three months the scheme administrator will claim basic rate relief back from HMRC. Any further higher or additional rate relief the member is entitled to is claimed via their self-assessment tax return. Tax relief on employer pension contributions is unlimited provided certain conditions are met.

There is an annual allowance in place in order to restrict tax relief on high earners. The annual allowance is currently set at £40,000 plus carry forward of any unused from the previous three tax years.

If I am self-employed, do I have to have a pension?

There is no legal obligation for you to save into a pension if you are self-employed. However, it is good to start saving for your retirement as early as possible to give your pension pot a longer time frame to potentially grow.

Find out more about starting a pension

Book a no-obligation review of your pensions

Contact Four Wealth Management today to book a no-obligation review of your financial situation and pension to determine what age you can retire and live comfortably.

The value of an investment with St. James’s Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation and reliefs from taxation can change at any time. The value of any tax relief depends on individual circumstances.

Income drawdown will reduce the size of your pension fund and the investment growth may not be sufficient to maintain the level of income you wish to draw. If you withdraw money at a rate greater than the growth achieved by your investments, your remaining fund will reduce in value. The level of income you take will need to be reviewed if the fund becomes too small – this is more likely than the higher the level of income you take.

The income you receive may be lower than the amount you could receive from an annuity, depending on the performance of your investments.

Enquire Now

If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

The Partner together with St. James's Place Wealth Management plc are the data controllers of any personal data you provide to us. For further information on our uses of your personal data, please see the Partner's Privacy Policy or the St. James's Place Privacy Policy.

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