For most people, a pension is one of the best ways to save for your retirement. Not only do you receive tax relief on contributions up to £40,000 a year, but if you're employed and eligible for it, your employer is obliged to contribute too.

However, saving into a pension means that in all but the most exceptional cases, you won’t be able to access your money until you reach the age of 55 (rising to 57 from 2028).

This article summarises why it’s unlikely you’ll be able to access your pension early. We’ll also look at alternative tax efficient investments you may choose to consider as part of your retirement portfolio – especially if you want to retire earlier than age 55.

It’s not normally possible to withdraw money from your pension before the age of 55

Attempting to access your pension early

It’s not normally possible to withdraw money from your pension before the age of 55, although there are some health or scheme-related exceptions. For example, you may qualify for early pension release if you are have retired early due to ill health, or you have a terminal illness and have less than one year to live.

Outside of that, unauthorised withdrawals before the age of 55 come with a hefty tax charge of 55%. And even if you were willing to effectively wipe out the financial benefits gained from saving into a pension by taking such a step, you’re likely to find that most pension schemes won’t allow you to do so.

If you need emergency funding, there is likely to be a far better option. And if you’re being persuaded to withdraw your money by a third party with the promise of high returns, beware. It’s more than likely to be a scam.

Consider tax-efficient investments to run alongside your pension to give you an accessible income

Alternative investments for your retirement

If you’re planning on retiring before the age of 55, you should consult a financial planner. They will advise you on the most tax-efficient investment schemes and products to run alongside your pension to give you an accessible income during those early retirement years. Below are some of the most common examples.

It is worth pointing out that with any investment you make, your money can go up as well as down. Before investing, make sure you consult with a financial planner to fully understand the risk levels.


Over recent years, the property market has enjoyed a sustained period of growth. Many people have built up a property portfolio and enjoyed a healthy rate of return on their investment. But the property market is not immune to falls.

Another consideration that needs to be factored into property investing is that Capital Gains Tax (CGT) will be due on any increase in value when you sell. And, if you plan to use a rental return to boost your retirement income, it will incur tax depending on the tax bracket your overall income falls into.


An Individual Savings Account (ISA) allows you to invest up to £20,000 per annum without paying capital gains or income tax.

Cash ISA returns are currently very low and are generally best for short-term savings. So, if you’re investing for the long-term you may want to explore a Stocks & Shares or Innovative Finance ISA. As opposed to Cash ISAs, which offer a fixed rate of interest, they give you the opportunity to generate higher returns in exchange for increased risk.

Stocks & Shares ISAs

  • Your money is invested in stock market company shares, bonds and funds
  • You can have access to your money within a week, depending on the account
  • It’s advisable to plan to keep your money invested for a minimum of five years to smooth out any ups and downs
  • These are higher risk than a savings account or cash ISA – but have the potential to give a higher return

Innovative Finance ISA

  • Your money is invested in peer-to-peer loans with borrowers, who could be individuals, businesses, or property developers
  • You can generally withdraw your funds at any time, but the investment is likely to perform best if you reinvest your repayments over three years
    You will tend to earn significantly higher rates of interest than in a traditional savings account
  • They are considered high-risk products with limited protections should the borrower default

Gain access to significant tax reliefs in return for investing in small, higher-risk companies

Venture Capital Schemes

Venture Capital Schemes are designed to encourage investment in start-ups and other relatively small businesses. Investors can gain access to significant tax reliefs in return for investing in small, higher-risk companies or social enterprises.

But because of the higher risks involved, these schemes tend to be appropriate only for more experienced investors with sophisticated needs, under the careful guidance of a financial planner.

Venture Capital Trusts (VCTs)

  • A VCT is a listed company in its own right that invests in a number of qualifying businesses
  • Investors can invest up to £200,000 per year and claim 30% tax relief, as long as the investment is held for a minimum of five years
  • As well as tax relief on the initial investment, dividends are tax-free, and there’s no Capital Gain Tax (CGT) to pay, as long as the shares are held for the full five years

Enterprise Investment Scheme (EIS)

  • An EIS enables investors to invest in specific early-stage businesses
  • Investors can invest £2 million per year and claim 30% tax relief up to the maximum allowance, as long as the shares are held for three years
  • Because you are investing in the fortunes of a single business, the risks are significantly higher than a VCT. Therefore, the tax reliefs are higher and could potentially reduce your overall exposure to 38.5% of the original investment

Seed Enterprise Investment Scheme (SEIS)

  • A SEIS offers funding to new businesses looking to raise equity capital during the first two years of trading
  • The maximum you can invest in an SEIS and benefit from tax relief is £100,000 per year
  • The risks are considered high, and therefore investors receive 50% income tax relief on the initial investment, tax-free growth and 50% Capital Gains reinvestment relief
  • Your potential exposure to the original amount invested could be as low as 13.5%

There have been significant changes to pension savings in the Spring Budget 2023 that may impact your retirement planning. To find out more, see: How does the 2023 Budget affect your pension and retirement planning?

Amber River Financial Planning

If you’re planning to retire before the age of 55 or want access to your long-term savings at all times, it’s essential to plan your finances carefully. Your investments – and any income taken from them – can fall as well as rise, and you may not get back the full amount invested.

An Amber River financial planner can help you achieve your pre- and post-retirement goals. They’ll assess your risk appetite, alongside your objectives and current position, to help you build a diversified, tax-efficient portfolio of investments that reflects your needs.

Get in touch

To speak to one of our team, arrange an appointment or find out more, call 0800 915 0000, or alternatively use our contact form here.