How can I take money from my pension for urgent family needs?

Q. I would like to take funds from my pension for urgent family needs, what is the process?

A. Thank you for your question. I’m going to assume you are talking here about accessing your pension savings before the age of 55. This is the ‘normal minimum pension age’ when tax rules allow you to take retirement money while benefitting from the tax advantages of pensions. Note that the normal minimum pension age will rise to 57 from April 2028.

Taking money before your normal minimum pension age is regarded as an ‘unauthorised payment’. Barring a few exceptional circumstances, which we outline below, this will trigger a punitive 55% charge. Other surcharges can mean the total percentage reduction on your money is even higher than that.

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There are two scenarios, however, where it is possible. Both are related to the health of the pension holder - although not their family members.

The first is in cases where you are no longer able to do your job due to ill health. This would need to be confirmed by a GP or consultant. In these situations, where you have been forced to retire early due to ill health, you may be able to withdraw pension funds. This is subject to the rules that govern your specific pension scheme - some schemes do not allow this at all. Withdrawals would be subject to tax as income.

The second case is where you have been diagnosed with an illness and have less than 12 months to live, which would need to be confirmed by a GP or consultant. In these situations, you can make a full withdrawal of your pension tax-free.

Outside of these scenarios you will not able to withdraw your money and escape the unauthorised payment charge. Even if you were willing to pay the charges to get at your money, your pension provider may not be willing to make the unauthorised payment.

A warning here - some companies have advertised ‘pension liberation’ schemes which offer to give you access to your pension money before age 55. These schemes are often linked to fraud and will cost you vast proportions of your pension savings.

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Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a pension and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a pension product will not be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.