Some people may wish to retire early by choice or have to stop work due to ill-health or redundancy. This is known as early retirement and can have an influence on both State Pensions and Personal Pensions. It’s essential to understand how retiring early could affect how much money you have to live on.
Retiring before the State Pension Age will mean that the person retiring will not receive their State Pension instantly. They may also get less when they reach State Pension Age than if they had continued in employment. To get a State Pension, one needs to work 35 years during which they have paid National Insurance Contributions. Early retirement could mean fewer qualifying years, if you have not yet reached 35 years.
Taking early retirement needn’t impact on your state pension if you boost your National Insurance contributions(NICs). There are several ways in which to increase NICs. These include:
The details of company, personal or stakeholder pension schemes will outline when the pension plan holder can retire without penalty. Many pension schemes make provision for early retirement on the grounds of ill-health. Your pension provider should be able to highlight how early retirement will affect your pension.
Being a member of a personal pension, occupational pension, or stakeholder pension will be affected by early retirement. However, it can be unaffected if you hold a final salary pensions. If you wish to retire early, it is worth bearing in mind that it is unlikely that you have a final salary pension schemes. This type of pension is becoming increasingly rare, with many companies closing their schemes to new members. However, many UK employees have some form of final salary scheme.
This type of pension calculates retirement income based on a small fraction of salary, multiplied by the number of years as a member of the scheme. Both of these will be impacted on by early retirement. Some companies may block their employees from taking a pension before the average retirement age. However, ill-health may have an impact on this, and provide for an enhanced pension in the case of ill health.
You can also request contact details from the Pension Tracing Service by phone or by post.
The Pension Tracing Service
Telephone: 0800 1223 170
From outside the UK: +44 (0) 1782 389134
Monday to Friday, 9:30 am to 5:00 pm
Address
The Pension Tracing Service
The Lantern
High Street
Ilfracombe
EX34 9QB
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This service is not affiliated with the Department of Work and Pensions or any government body. The Pension Tracing Service does not offer financial advice to our clients. However we can allocate you an Authorised and Regulated Pension Specialist.
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