Want To Cash Out Your Pension Early?

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If you are 55, you can cash out money. Best of all, the first 25% is tax-free1! Even if it’s taken as a lump sum. On the other hand, when you cash out more, you’ll be expected to pay income tax on the extra amount. Nevertheless, if you spread out your cash withdrawals and keep below higher rate bands, you may pay less tax. How awesome is that?

How Do I Cash Out My Pension?

When you turn 55, you have a few options to get your money. As a lump sum, or as smaller segments. Lump sums aren’t everyone’s cup of tea, so here are some other options for you to consider:

1. Withdraw a Lump Sum Out of Your Savings

Simply put, the first 25% of your withdrawal won’t be taxed. However, you’ll need to pay income tax on the other 75%, since you didn’t pay income tax at the beginning. If you withdraw everything at once, you might be taxed more.

2. Convert to a Regular Income

What does this mean for you? If you want to get a consistent retirement income from your pension pot (or annuity), you have the option of ‘selling’ your pension pot. You can sell it to any insurance or pension company of your choice. They’ll calculate your annual income for you. Although this might sound a bit unusual, the perk is that you’ll get a constant income. The annuity company runs the risk of paying out more than your pension pot, but all of this will comes at a price.

3. Take Smaller Cash Amounts Regularly

If you want to control your pension savings yourself, you can withdraw smaller amounts whenever you choose to, instead of giving all your savings to an annuity company. However, the annuity company determines the amount you’ll get. There are benefits to taking this approach:

  • You can withdraw any amount you need, and as often as you like.
  • If you head, you can avoid going over the higher tax band, avoiding a higher tax rate on your cash withdrawal.
  • When you pass away, you can give the remaining pension to someone. They will not be expected to pay tax on what they are inheriting from you. Even if they cash out that money as a lump sum.

4. Leave It for Now & Cash Out Your Pension Later

Most of the modern pension plans out there are invested in a mix of shares, property, bonds and cash. The PensionBee plans operate like that. If you’re 55 of age and you’re still employed, it might be better to leave it for now and cash out at another stage. The longer your cash is invested in your pension plan, the more likely it is that your pension pot will increase. If you’ve decided to go with the PensionBee ‘Tailored’ plan, your cash will be moved to safer assets gradually. PensionBee will move it into bonds and cash as you age. BlackRock, who is the money manager of the plan, finds bonds and cash more stable. Now, this might be more appropriate when you’re older or closer to retirement. Have a look at the pension plans that are available and would suit you in your retirement age.

Things to Consider When Cashing Out Your Pension

  1. You’ll be expected to pay tax when cashing pension out early. Remember, you didn’t pay tax on your pension contributions. It turns out that the Government will charge income tax on the ‘income’ you cash in. The first 25% won’t be taxed; anything above 25% will be taxed. If you look at State Pension income, your pension cash withdrawal could be taxed within a higher tax band.
  2. When you withdraw cash from your pension pot, it will affect how much you can cash out at a later stage. On the other hand, if you keep your money invested for a more extended period, it will have more time to grow.
  3. In my own experience, I got a lot of help from financial advisers. They might clear up any uncertainty surrounding cashing out your pension. Just make sure about the financial adviser’s service fee. Accessing the Government’s free impartial Pension Wise service2 is another option if that’s what you prefer.

You Can Manage Your Savings Easily With PensionBee

You can take charge of your retirement savings online. It’s all in one place with PensionBee, for your convenience! Better yet, the PensionBee pension calculator can help you to set a retirement goal. With PensionBee, it is easy to set up cash inputs regularly. You can also make one-off payments quickly and hassle-free. All these actions are possible from your online account. As if that’s not enough, existing users can also get the app from iTunes or Google Play stores. Once you’ve downloaded the app, you access to your real-time pension balance.

Join PensionBee now and take control of your pension saving. This can be a good pension benefit for your future.

Common Questions

Can I Cash in My Small Pension?
Can I Cash in My Pension Under 55?
Can I Cash in My Pension for A Lump Sum?
Can I Cash in My Pension UK?


There is good news for you! Once you turn 55, you’ll be allowed to take out some of your money from your pension investment. Even though there are some rules around this, there is light at the end of the tunnel! You won’t have to struggle with your finances anymore!

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