There’s no rigid age at which we must retire and the right time for you to stop work will depend very much on your individual circumstances.
Here, we look at when you can access your pension, and how when you take it can affect how much you get in retirement.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
When can I retire?
Employers used to be able to force you to retire at 65, but since this rule was scrapped in 2011, you can technically retire whenever you want. There are, of course, some major considerations before deciding when to retire, or phase your retirement. Often, the more important question is – when can I access my pension? Chances are, you’ll need to consider how to use your pension to provide an income before leaving work, or reducing your hours, and your pension may have particular rules around this. Learn more about phasing your retirement in our guide How can I phase my retirement?
The age you can access your pension will depend on the type of pension you have and the terms of the scheme you signed up to, so in the following sections we cover what you can expect from the main types of pension scheme.
Final salary pensions
Old style final salary pensions set a retirement age when people are expected to retire. This age – called a normal retirement age – can vary from profession to profession and scheme to scheme, but it’s typically 65. However, it could be 60 or even younger. You generally can’t retire earlier than this age without receiving a lower pension.
Final salary pensions are also called ‘defined benefit’ pensions. Some defined benefit pensions aren’t final salary because they are based on your salary throughout your time with the employer and not your salary before retirement. These are called ‘career average’ pensions.
If you want to carry on working, or if you can manage financially without taking your final salary pension, you don’t have to take it. Your employer (or to be more accurate, the pension scheme rules) may insist that you take your pension once you’ve had your 75th birthday.
The longer you leave it before you take your pension, the bigger the amount you should receive each month/year. That’s because the pension doesn’t have to pay out for as many years as if you took your pension earlier.
Although you’re likely to get a larger pension payment every month if you take it later, you won’t be paid the pension you ‘missed out on’. You can find out more about how final salary pensions work in our guide What is a defined benefit pension?
Defined contribution workplace pensions
With a defined contribution pension, sometimes known as a money purchase pension, you have a fund or pot of money that both you and your employer usually pay into. Automatic-enrolment pensions are generally defined contribution pensions. Find out more about auto-enrolment in our guide How does pension auto-enrolment work?
As with final salary pensions, these workplace pension schemes will set a normal retirement age. You can find out more about defined contribution pensions in our guide What is a defined contribution pension? If you want to retire late or you don’t want to take money from your pension then, you can simply leave it where it is. You may, for example, decide to retire later because you haven’t yet saved enough into your pension to provide you with a comfortable retirement. Learn more about this in our guide Can you afford to retire?
However, depending on the kind of funds your money is invested in, you could lose out by delaying your retirement, unless you tell the pension scheme well in advance. This is explained in more detail in the section below on ‘lifestyling’.
Leaving lifestyling out of the picture for now, there’s another issue you need to consider. And that’s that your pension money may be invested in riskier investments than you feel comfortable with. Learn more about this in our guide Where is my pension invested? What might have seemed like a good idea when you were in your 40s may not be such a good plan when you’re in your late 50s or 60s. It’s the kind of decision that it’s a really good idea to take independent financial advice about.
Retirement age for defined contribution pensions with lifestyling
If you sign up to a defined contribution workplace pension, your money will usually be invested in what’s called a ‘default fund’ unless you actively choose other funds. These funds used to vary quite widely – and still can.
As mentioned, default funds use something called ‘lifestyling’, which means they gradually move your money from riskier investments, such as shares, to lower risk ones, such as bonds and cash, the closer to retirement you get. This process generally starts happening between 15 and ten years before the normal retirement age.
Higher risk funds have the potential to provide higher returns (although that’s obviously not guaranteed). Lower risk funds generally tend to produce lower but steadier returns. According to the pensions and insurance company, Aviva, changing when you retire but not telling your pension company in advance, can knock thousands of pounds off the value of your pension.
It gives three examples based on someone earning the average UK salary of £27,664, automatically enrolled into their workplace pension at the age of 22 and with the legal minimum contributions (of approximately 8% of salary) being paid in by employer and employee.
- Retirement age set to 68, lifestyling begins at 53 – Total fund value at 68 is £137,600
- Retirement age set to 65, lifestyling begins at 50 – Total fund value at 68 is £133,500
- Retirement age set to 60, lifestyling begins at 45 – Total fund value at 68 is £127,700
A spokesman for Aviva said: “If your pension has an assumed retirement age that’s too young, your default investments will be moved to less risky investments too early – missing out on possible investment growth. Similarly, if the assumed retirement age is too old, the investments will be moved too late – exposing your money to heightened risk. Neither would be a good outcome.”
Often the value of your pension may fall in response to political and economic uncertainty. This can be really unsettling, but it’s vital not to make any panic decisions as if you cash in your pension investments, you will be turning any paper losses into real ones. You can find out ways you might be able to manage market volatility in our articles Four ways to weather stock market storms and 9 tips for maximising your pension savings in difficult times.
What is the retirement age for personal pensions?
If you take out a pension directly with a pension provider, or through an independent financial advisor, you can usually access your retirement savings from the age of 55, rising to 57 by 2028. Also, you have to choose your investment funds. However, a number of the funds on offer also have lifestyling.
Action points
Here are some steps you might want to consider taking to ensure you know what your retirement age is:
- If you’re in a workplace defined contribution pension and you don’t know what the normal retirement age is, ask your HR department or the pension provider.
- If you want to retire later than the age you’ve chosen, check to see if you’re in a default fund or one that has lifestyling.
- If your pension money is in a default fund or a fund that has lifestyling, check when the lifestyling kicks in – namely, when the fund starts moving your money from shares and into bonds and cash.
- Consider how much your pension might be worth at your chosen retirement date and whether you should be saving more. The Rest Less pension calculator can help you estimate how much you need to save for retirement, what your pension pot will be worth, and how long your pension pot will last.
- Change your retirement age. You can normally do this online. If you don’t already have an online account, you’ll have to set one up.
- If you want to get some tips and guidance for free, and you’re aged at least 50, you can arrange a phone appointment via the government’s free service called Pension Wise. Or, for more information, check out our guides on How to find the right financial advisor for you or How to get advice on your pension.
- Contact an independent financial advisor if you want tailored advice about what to do.
If you’re considering getting professional financial advice, Unbiased is offering Rest Less members a free pension review. It’s a chance to have a qualified independent financial advisor (IFA) take a look at your pension arrangements and give an unbiased assessment of your retirement savings.
The review is free and without obligation, but if the IFA feels you’d benefit from paid financial advice, they’ll go over how that works and the charges involved.
What is my State Pension age?
Your State Pension age will vary depending on when you were born, and it’s important to note that the State Pension age is under review and is gradually being pushed back so that it’s in line with rising life expectancy. It’s due to increase to 67 between 2026 and 2028 and then again to 68 between 2037 and 2039.
To help you understand what your State Pension age is likely to be, you can use this tool to tell you when you’ll be eligible to start claiming. Learn more about the State Pension in our guide How the State Pension works.
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