In the UK you can usually retire early on a private pension from age 55, rising to 57 from 6 April 2028, but the State Pension cannot be paid before State Pension age, which is 67 for anyone born on or after 6 March 1961, so for almost everyone retiring early today. Early retirement therefore means funding a gap of ten years or more from private pensions and savings. Up to 25% of a pension can be taken tax-free, the rest is taxed as income above the £12,570 personal allowance, and payments before the minimum age are usually taxed at up to 55%.
The earliest age you can take a private pension
Section 279 of the Finance Act 2004 sets the normal minimum pension age at 55 until 5 April 2028 and 57 from 6 April 2028. Your scheme's rules may set a later age, so check with each provider.
The change to 57 catches people who reach 55 shortly before April 2028. Someone born in 1972 turns 55 in 2027 and can draw then, but from 6 April 2028 the minimum age becomes 57 while they are still 55 or 56, Without further rules, some payments made to them after 5 April 2028 could fail the minimum age test. HMRC consulted from August to September 2026 on draft regulations under which, in specified circumstances, members aged 55 or 56 on 5 April 2028 whose entitlement arose earlier would be treated as having reached 57, so those payments stay authorised. The regulations had not been made at the time of writing, so ask the scheme how any further withdrawals would be treated. The exception is a protected pension age: under paragraph 23ZB of Schedule 36 to the Finance Act 2004, members who had a right before 4 November 2021 to take benefits below 57, under scheme rules in place on 11 February 2021, can keep the lower age. Ask the scheme in writing whether you have one before making any transfer.
Retiring early because of ill health
You can take a pension before the minimum age if you meet the ill-health condition in Schedule 28 to the Finance Act 2004. The scheme must have evidence from a registered medical practitioner that you are, and will continue to be, incapable of carrying on your occupation because of physical or mental impairment, and you must have actually stopped that occupation. Some schemes pay higher benefits on ill-health retirement.
If you are expected to live less than a year and are under 75, you may be able to take the whole pot tax-free, up to your lump sum and death benefit allowance of £1,073,100.
Bridging the gap to State Pension age
State Pension age is rising from 66 to 67. It is 66 plus between one and 11 months for those born between 6 April 1960 and 5 March 1961, and 67 for those born on or after 6 March 1961, which covers almost everyone retiring early today. Our guide to UK pension age sets out the dates. The full new State Pension is £241.30 a week in 2026/27, but only with enough National Insurance:
- Qualifying years. You usually need 10 qualifying years to get any new State Pension and 35 for the full rate if your record started after April 2016;
- Gaps. If you stop work at 58, you may build fewer qualifying years. Check your National Insurance record and forecast before you leave;
- Voluntary contributions. Class 3 contributions cost £18.40 a week in 2026/27, and you can usually pay for gaps in the past six tax years.
How early withdrawals are taxed
You can usually take up to 25% of a defined contribution pot tax-free, within the lump sum allowance of £268,275. The rest is pension income, taxed through PAYE at 20% between £12,571 and £50,270, 40% up to £125,140 and 45% above that (Scottish rates differ). Large one-off withdrawals can push you into a higher band, so phasing them over several tax years usually costs less tax.
Worked example
Helen retires at 58 with a £360,000 pot and no other income. She takes a £90,000 tax-free lump sum and moves £270,000 into drawdown. She plans to draw £25,000 a year until State Pension age at 67.
- Tax on drawdown. £25,000 less the £12,570 personal allowance leaves £12,430 taxed at 20%, which is £2,486 a year;
- Alternative. Drawing £75,000 in one year would put £24,730 into the 40% band. Total tax that year would be £17,432, compared with £7,458 spread over three years at £25,000;
- After 67. Once the State Pension starts, it uses most of her personal allowance, so more of each drawdown payment is taxed.
Other consequences of retiring early
- Smaller pension. A pot started early has less time to grow and must last longer;
- Money purchase annual allowance. The first income withdrawal from drawdown, or a cash lump sum from the pot, cuts your annual allowance for future money purchase saving to £10,000. Taking only the tax-free lump sum does not;
- Benefits. Taking a pension early can reduce income-related benefits such as Universal Credit, Housing Benefit and Pension Credit;
- Contributions after 75. Contributions paid after age 75 do not get tax relief, which matters if you plan to keep saving after a phased retirement;
- Scams. Companies offering to release a pension before 55 are offering an unauthorised payment taxed at up to 55%.
Early retirement checklist
- Confirm your access ages. Ask each scheme for its earliest retirement age and whether you have a protected pension age;
- Get a State Pension forecast. Check your State Pension age and National Insurance gaps;
- Budget the gap. Work out the income you need until State Pension age and where it will come from;
- Plan the tax. Decide how to take tax-free cash and phase withdrawals across tax years;
- Get guidance. Book a free Pension Wise appointment if you are over 50, and take regulated advice before transferring a defined benefit pension worth more than £30,000 to a defined contribution scheme.
Sources: GOV.UK, Early retirement, your pension and benefits, Tax when you get a pension, The new State Pension, Voluntary National Insurance and Income Tax rates; Finance Act 2004, section 279, Schedule 28, paragraph 1 and Schedule 36, paragraph 23ZB; and Pensions Act 2014, section 26; and HMRC's consultation on Normal Minimum Pension Age Transitional Provisions Regulations. See also how much a pensioner can earn.
Acumon's private client tax team can model withdrawals year by year so early retirement costs as little tax as possible. If you are selling or stepping back from a business to retire, our succession planning service can help with the exit.