5 factors to consider before accessing your pension at 55

When you finally reach the minimum retirement age, it can feel as though you’ve achieved an important financial milestone.

As of 2026/27, you can usually access your pension savings from 55, rising to 57 from 2028.

This might be long before the age you plan to actually retire. Yet, upcoming changes to Inheritance Tax (IHT) seem to be encouraging more people to access their pensions earlier than planned.

From April 2027, unused pension funds and death benefits will be classed as part of your estate for IHT purposes.

Since your pension could be one of your largest assets, this could mean much more of your estate will face the tax when you pass away.

As a result, you may be considering whether withdrawing wealth from your pension sooner could reduce future IHT liability for your loved ones.

If you have been feeling this way, then you aren’t alone. According to FTAdviser, 116,100 people aged 55 withdrew a total of £2.3 billion from their pensions in 2024/25.

This was a rise from 110,200 55-year-olds withdrawing £2.1 billion in 2023/24 and 99,400 withdrawing £1.9 billion in 2022/23.

While this might be wise in some cases, taking money from your pension too early could have long-term consequences if you don’t have a clear plan for what you’ll do with the funds.

Read on to discover five factors to consider before accessing your pension at 55.

1. Whether you need the money right now

Before drawing from your pension, it’s worth asking yourself if you actually need the money.

A survey reported by IFA Magazine found that 21% of respondents withdrew a cash lump sum from their fund as soon as they turned 55. Of those:

32% did so to cover essential expenses
46% said they accessed their pension “because they could”.

Your pension is typically designed to provide an income throughout your entire retirement. If you take a significant lump sum at 55 and don’t need it immediately, you may reduce the amount that remains invested for your future.

If you’re still working and don’t expect to stop for several more years, you may be withdrawing funds that you don’t need, meaning you miss out on valuable investment growth.

If you’re concerned about IHT, however, it may benefit you to access your pension and gift wealth to the next generation. But it’s prudent to have a detailed plan for the funds you withdraw.

This might include deciding who you plan to support and whether you can realistically afford to give away the money without compromising your financial security.

Remember that withdrawing money from a pension doesn’t automatically resolve IHT concerns. If the funds remain in a savings account, they could still form part of your estate.

2. What the tax implications of accessing the pension could be

You can typically take up to 25% of your pension fund as a tax-free lump sum. Anything above this is normally treated as income and taxed at your marginal rate.

Taking a significant lump sum could inadvertently push you into a higher tax band, especially if you’re still working or receiving income from other sources. You might withdraw more than you need, only to pay a large Income Tax bill on money that could have remained invested in your pension.

Additionally, using your tax-free lump sum right away could limit your ability to draw a tax-efficient income from your pensions when you eventually retire.

You should also be aware of the Money Purchase Annual Allowance (MPAA).

As of 2026/27, the Annual Allowance – the maximum amount you can put into a pension without triggering an additional tax charge – stands at £60,000.

If you’ve flexibly accessed your pension, you may have triggered the MPAA, reducing the amount you can contribute tax-efficiently to your retirement fund to £10,000 a year.

This could be an issue if you access your pension at 55, continue working, and wish to contribute more to your fund.

3. How long your savings are likely to last

Life expectancies are on the rise in the UK, and while this is undoubtedly positive, it also means your pension needs to support you for years to come.

A life expectancy calculator from the Office for National Statistics reports that a 55-year-old man in May 2026 has a 34.7% chance of living to 90. Meanwhile, a 55-year-old woman has a 48.9% chance.

This means your pension might have to last a 20-, 30-, or even 40-year retirement.

Moreover, Retirement Living Standards states that you may require £43,900 a year to fund a comfortable retirement.

While this is only a benchmark figure that would vary depending on your desires and unique circumstances, it still shows just how much income you may need when you stop working.

Drawing from your pension too early could increase your risk of facing a shortfall later in life.

4. Whether you have alternative assets to draw from

Before accessing your pension, it may be worth considering whether you have other assets you could use first.

For example, you may have:

Cash savings
ISAs
General Investment Accounts
Rental income
Business assets

It’s important to note that these sources may be treated differently for tax purposes. Withdrawals from ISAs, for instance, are typically free from Income Tax and Capital Gains Tax.

This could make them a practical option if you need to supplement your income without increasing your tax bill.

Cash savings can also be suitable for short-term needs or emergencies, especially if you want to avoid selling investments during a market downturn.

5. If you would benefit from financial advice

Drawing from your pension is a significant decision. There are many factors to consider, and if you access your wealth without careful thought, some consequences can be difficult to reverse.

The “right” choice will depend entirely on your unique needs and goals for the future. So, financial advice can help you understand the potential benefits and drawbacks of accessing your pension before you act.

We can review all your assets, including your pensions, savings, and investments.

Then, we will assess these against your estate planning goals and retirement income needs, using sophisticated cashflow planning software to show how different decisions might affect your wealth over time.

This could help you make more informed decisions based on your long-term plans, rather than reacting to upcoming tax changes or other short-term concerns.

Get in touch

If you’re thinking about accessing your pension at 55, we could help you understand your options and build a strategy to support your retirement plans.

Please contact us at hello@ardentuk.com or call or WhatsApp us on 01904 655 330. As an award-winning financial advice company with advisers included in the 2025 VouchedFor Top Rated guide, we can assure you that we’re a bona fide company providing excellent advice and high-quality service.

Please note

This article is for general information only and does not constitute advice. The information is aimed at individuals only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.