How Long Does It Take to Withdraw From a Pension?

We find out how to withdraw funds from a Pension and how long it takes.

Updated: June 12, 2024
Matt Crabtree

Written By

Matt Crabtree

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You've been putting money aside for your retirement for ages, and now you're prepared to take your retirement fund and unwind. However, you might be wondering how long it takes to make a pension withdrawal.

You can learn all you need to know in this post, including how to withdraw your pension, when you are able to do so, certain factors you should take into account prior to doing so and more.

Here is a quick guide to explain how long it takes to withdraw from a pension. 

Key Summary 

  • Although it can take 4 to 5 weeks to extract a full amount, it will normally take 7 working days to pull the cash from your pension account.
  • Before you can withdraw your retirement, you will need to wait until you reach the age of 55 (which will increase to 57 in 2028). You could do this at a younger age, but there will be costs and taxes.
  • Once you turn 55, you are eligible to withdraw 25% of your pension as a lump payment tax-free. Anything beyond this will normally be taxed at your marginal rate as income.

How Long Does It Take to Withdraw From a Pension? — Overview 

Once you officially choose to stop receiving your retirement money, you must contact your pension issuer to do so. Although various service services may have differing dates for making the transfer into your checking account, you can normally expect a delay of about 7 working days while your application is being handled.

Nevertheless, if you are interested in setting up recurring income transfers, it can take a little longer to process your request; normally, it takes about 18 working days.

When is the pension money available?

Usually, you have to wait until you're 55 years old to get your pension. By 2028, this is anticipated to reach 57.

The State Pension Age will, however, be 66 in the tax year 2023/2024. Therefore, you might have to delay until this time to begin drawing an income in retirement if you don't have a private pension.

Remember: To find out when you may begin receiving a pension and making withdrawals from your defined-benefit pension (also known as the last salary retirement), you should confirm with your provider. Although it varies by provider, you can typically take from a defined-benefit pension at age 60 or 65.

Can you still work at 55 if you withdraw?

Typically, you have the option to retire at 55 while continuing to work. There are a variety of reasons why you could decide to start drawing from your pension at age 55, either partially or fully. 

Some people opt to continue working while supplementing their income with their pension. Others might choose to start shortening their work weeks or perhaps retire earlier. Whatever works best for your specific situation.

How to Withdraw Pension Funds: Benefit Plans vs Contribution Plans

There are a number of things to think about if you reach the age of 55 or the age at which you are eligible to make a withdrawal from your particular pension plan and decide to take funds out of your retirement account. Regardless of if your pension is a defined benefit or defined contribution pension will rely on your particular situation, your pension objectives, and the type of retirement you have.

If you do not desire to, you are not obliged to do anything with your pension fund. You may decide whether to withdraw the money when it's most convenient for you or keep the investments in place and receive tax benefits until you're 75 years old.

Withdrawing from a defined contribution plan

You have a few options for how to spend the funds in your pot if you have a defined contribution pension. To fit your requirements and goals for retirement, you can mix or employ the various choices.

The first 25% of your pension can be taken tax-free if you start taking withdrawals for retirement; the remaining 75% is subject to income taxation 📰. According to what you choose to do with the remainder of your retirement, you could then accept the 25% tax-free sum as a cash lump sum or in smaller amounts.

Whether you receive your tax-free sum on a regular basis or only once will depend on how you choose to use it.

Withdrawing from a defined benefit plan

When and how you can withdraw your pension will be governed by the regulations of your individual defined benefit pension plan. These programs frequently last until you turn 65, at which point your company ceases making pension contributions and you begin receiving payments from your plan.

You might be able to begin drawing from your pension at 55 under some defined benefit plans. On the other hand, this may have a long-term effect on how much you receive. Others could let you postpone receiving your pension in exchange for a bigger income when you finally do.

Before making any choices regarding withdrawing, it's crucial to review the precise facts of your program and receive regulated financial advice.

Taxes on Lump Sum Withdrawals 

You often have the option to accept a share of your pension payments as a single payment of tax-free income if you begin receiving earnings from your plan. Your annual personal allowance, or the amount of wealth you are not expected to pay tax for each year, is unaffected by your tax-free number.

The personal allowance is now set at £12,570 for the 2023/2024 tax year.

If you participate in a defined contribution plan, you may receive a tax-free cash lump payment equal to up to 25% of the entire amount that has accrued in your pension pot, provided that you've not used up your lifelong limit.

If you participate in a defined benefit pension plan, the regulations of the plan will dictate the amount of a tax-free cash lump payment you may get and the amount that your future income will be lowered.

The remainder of your pension benefits will be subject to tax. Your annual income total as well as your tax rate will determine how much tax you must pay.

Choosing to accept the cash lump payment has a variety of benefits and drawbacks, and they may vary depending on your unique situation. Before deciding how and when to draw your pension, make sure to seek regulated financial advice about your alternatives.

To Sum Up: Getting Your Money As Quickly As Possible

Your age and, if it's a workplace plan, the date you signed up will decide your capacity to “cancel” your pension.

You are able to take out the entire amount of your pension if you are 55 and choose to “cancel” it. 25% of your withdrawals will be tax-free, after which any additional amounts will typically be subject to income tax

However, there is a considerable probability you will pay large fees and taxes if you are under 55 and want to cancel your pension to get your hands on all of your money.

For instance, if you were to take your pension early, you may be subject to a tax of up to 55%, on top of this tax, your issuer would charge you an early termination fee. This might make taking an early pension payout costly and ineffective.

With a workplace pension, however, the above may not be the reality as you will probably be considered as if you never participated in a scheme with them if you want to end your participation within a month of submitting your first payment.

You will therefore be able to easily remove your funds and take them in cash.

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