Pension: Expert advises people to 'start sooner'
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Early retirement often involves a full departure from the workplace earlier than expected. This could be before the age of 66, the current state pension age, or closer to pension freedom age – which is 55. However, what is important to understand about early retirement is the financial aspect of the matter.
This is particularly vital, given many Britons will have to find ways to support themselves for a longer period of time without the constant income of a salary or wages.
In this sense, when planning an early retirement journey, there are a number of factors which are worth considering.
First is the state pension – which serves as an important financial lifeline for millions of older people.
Even if a person chooses to retire early, they will not be able to unlock the state pension any sooner.
The earliest they will be able to get their sum is at the eligible state pension age, and so many early retirees will have somewhat of a wait on their hands.
To help Britons understand what they are set to receive and when, the Department for Work and Pensions (DWP) has offered guidance.
This is available through the state pension forecast, a tool which can aid understanding of entitlement.
It can also help individuals see whether they could increase their state pension entitlement.
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The tool is available online, but Britons can also fill in an application form or call the Future Pension Centre for the forecast to be posted to them.
Aside from the state pension, though, there are other aspects of an early retirement it is worth considering.
Namely, personal and workplace pensions will be important to many of those who are hoping to retire early.
However, the Government has stressed careful consideration of this matter, as breaking any regulations could be costly.
Its website explains: “When you can take money from your pension pot will depend on your pension scheme’s rules, but it is usually after you are 55.
“The pension pot you build up will probably be smaller if you retire early.
“This is because it’s had less time to increase in value.”
Individuals could be bale to take money out before this age, for example if they are retiring early due to ill health.
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But regardless of the situation, a pension provider should always be consulted.
The Government went on to warn: “Some companies offer to help you get money out of your pension before you’re 55.
“This could be an unauthorised payment. If it is unauthorised, you pay up to 55 percent tax on it.”
If a person does wish to enact an early retirement, they will need to understand they will often have to stretch their pension pot further.
Consequently, the financial implications of such a move should always be considered before action is taken.
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