Personal Finance

Claim pension two years early with no tax charge thanks to little-known rule


Thousands of people in the UK could be able to claim their pension early with no tax charge thanks to a little known rule.

Usually, UK workers are not allowed to claim or start making any withdrawals from their workplace pension until they reach the age of 55, increasing to 57 in 2028.

This is different to the state pension from the government, which hands out £221 a week to people when they hit state pension age, which is currently 66 but will rise to 67 in 2028.

Workplace pensions are built up over the course of your working life, with salary contributions matched up to a certain percentage by your employer making up a pot that’s invested over time, thus providing you with another income stream for retirement.

But there is a little known loophole which will allow people to take money from their workplace pension pot before they reach 55.

The government says there are two exceptions: early retirement due to ill health, and those who have ‘unqualified rights’.

Early retirement due to ill health will allow you to access your workplace pension sooner than age 55, with no tax charge.

The other scenario is what’s called ‘unqualified rights.’

The government explains: “Generally, if individuals take benefits from a registered pension scheme before age 55 (age 57 from 6 April 2028) they will be liable to a tax charge unless they are retiring due to ill-health. However, some individuals had unqualified rights on 5 April 2006 to take benefits before the normal minimum pension age.

“Where certain conditions are met these individuals may take their benefits earlier than age 55 (age 57 from 6 April 2028) without a tax charge. This is known as the individual’s protected pension age.

“So, with that one exception, when taking benefits from the relevant registered pension scheme, the tax rules apply to the member on the basis of their protected pension age rather than the prevailing normal minimum pension age.”

Certain types of jobs or occupations could be handed a protected pension age, which mostly focus on jobs which involve early retirement. This includes, for example, protected schemes for firefighters, police and the armed forces.

Changes to pensions will mean the workplace pension access age changes to 57 in 2028. But for people with a protected pension age after April 6, 2006, that age remains 55.

As Techzone explains: “The protection is given when both the following conditions are met: On 4 November 2021 the individual was a member of a scheme that had an unqualified right to take benefits before age 57, or they were in the process of transferring to such a scheme, and the scheme had the unqualified right within its rules as at 11 February 2021.”



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