Can I withdraw my pension before 55?
In a word, “no”. Unfortunately, no one can access their UK pension until they are over the age of 55.
UK Pension Withdrawal
The Pension Freedoms Act 2015 enabled anyone over 55 years of age to access their pension. This consists of a 25% tax-free lump sum (PCLS – Pension Commencement Lump Sum). The remainder can then be encashed on an ad-hoc basis, but it would be liable for income tax. Some older pension schemes may not allow flexible access, but under normal circumstances it is usually possible to transfer that internally at no additional cost with your pension provider to a scheme that does allow access, such as a SIPP (Self Invested Personal Pension).
This is where Harrison Brook can help. Our cross-border experts can not only advise you on your options and offer solutions to better manage your UK pensions, but also the best way to drawdown from the pension once you have reached 55. We have access to a wide range of expat retirement planning products from the world’s largest banking institutions, without restrictions on location, handpicked by investment specialists in model portfolios, structured for capital growth, income generation or both.
Key considerations for Withdrawing a UK Pension
- Portfolio management – in these uncertain times, investing in the right areas is more important than ever.
- Currency – big swings in the currency markets threatens your pension income, therefore it is vital to find a scheme that offers multi-currency investment to negate the risk.
- Efficiency of structure – many of the older pensions were based on bond structures and are largely inefficient, mainly due to the amount of time it takes to withdraw investments, and in a volatile climate that can make an enormous difference.
FAQs – Withdrawing a UK Pension
Can I withdraw the whole amount?
Yes, that’s possible. However, it will create a large tax liability. While the 25% is tax-free in the UK, the other 75% is taxable income in the UK or the country that you tax resident in as long as they have a dual taxation agreement (DTA) with the UK. In addition, any further monies will be taxed as income, which could add up to a sizeable amount. Where possible, we would advise our clients to withdraw over a number of years to negate the tax liability of large withdrawals.
Can I take my pension as income?
Yes, you can. The benefit of flexible access drawdown is that you can take pension payments however you prefer – be that regular monthly payments, quarterly or bi-annually.
What happens if I don’t have a UK NT code?
You will be taxed at source in the UK when making a withdrawal of over £12,500 and taxed in country that you are resident in. Then you will need to claim back your tax via HMRC. It maybe more prudent to have NT tax code status before actioning a withdrawal.
How long does the withdrawal process take?
A straightforward withdrawal usually takes between two and three weeks from starting the process to receiving your pension payment.
Can I be paid into my bank account in another country?
Again, this is where it is an advantage to have an International SIPP, as usually UK providers would not pay into bank account abroad. It is also important to avoid transferring e.g. GBP to a EUR account as you will be typically charged up 4% for converting the currency via your bank and an International SIPP can bypass this by exchanging internally. The best alternative option is to open a free foreign exchange account.
Do I have to take the whole 25% at once?
No, you can take 10% to begin with and the rest at a later date. The 25% is calculated at the time of requesting to withdraw monies. As such, it often pays off to invest your pension pot and let it grow.
Here at Harrison Brook, we specialise in assisting expats planning their retirement but also transfering their pensions, to find out more please get in touch here