Can I Retire at 55? What You Need to Know

Currently in the UK, you can retire from the age of 55 and access your workplace pension and self-invested personal pension (SIPP).

From April 2028 however this will be increasing to 57 years of age.

You can access your pension fund by taking it all in one go or making several pension withdrawals over time.

The rules around pensions can be complex so it’s really important to understand how they work and get professional expert help if anything is unclear to avoid being caught out.

The amount of money you should have in your pension by 55 depends on a lot of different factors.

For example, how much your expenses are likely to cost and how long you plan to be retired.

As a rough guide a single person needs around £13,400 per year as a minimum, £31,700 for a moderate retirement and £43,900 for a comfortable retirement.

For couples this increases to a minimum of £21,600 a year, £43,900 for a moderate retirement and £60,600 for a comfortable retirement, according Pensions UK.

In the UK, the average pension pot for someone aged 55-64 is around £145,900, according to the latest ONS.

Using a pension calculator can help you estimate roughly how much you’re likely to need.

For more tips check out our Investing Insiders Podcast episodes:

• How to Achieve Financial Freedom and Retire Early with Felicia Flinders
• The True Cost of Retirement & How to Afford It with Pete Cowell

It’s possible to cash in your pension from the age of 55 (it’s going up to 57 in April 2028).

Taking your pension in a single payment is known as Uncrystalised Funds Pension Lump Sum or UFPLS.

Doing this means that you could lose a lot of your pension to income tax which could significantly reduce how much you have to live on during retirement.

Even if you save or invest the lump sum you might need to pay more tax on the interest or investment growth. That’s because the growth your money gets within a pension is tax free.

Some of the pros of retiring at 55 include:

Reasons to use

• Flexibility: more time to for what you want to do in life outside of work such as spending time in family, hobbies or travel
• Expansion: opportunity to pursue new interests, studying or perhaps entrepreneurship
• Health: taking time to focus on your health, resting and burnout recovery

Reasons to avoid

• Affordability: a larger pension pot and additional funds from savings and investments will be required to fund your retirement
• Loss of benefits: you’ll miss out on employer contributions and tax relief that comes with a workplace pension
• Reduced returns: dipping into your pension earlier means that you will miss out on potential investment returns for the money taken out

If you’re not ready to retire at 55, there are a few alternatives to consider:

• delay retirement: keep working full time until you’re ready to retire
• phased retirement: this is when you gradually move towards retiring by reducing the amount of hours you work
• savings and investments: you could use money from your savings accounts, Cash ISAs or sell investments within a Stocks and Shares ISA to cover your expenses until you’re ready to retire