This blog has detailed the different benefits one can claim if they choose early retirement. 

It has also emphasized the conditions imposed on their receipt in terms of eligibility and other work-related circumstances and the consequent impact on the amounts received and the ability to claim itself.

Can I claim any benefits if I retire early?

Yes, you are still eligible to claim benefits if you choose to retire early. Now that the United Kingdom government has repealed a fixed retirement age, employers cannot force you to leave on the basis of your age alone. 

You can continue working past the previous ‘default’ retirement age of 65. This is now just a benchmark to be able to access post-retirement benefits, but it doesn’t prevent you from continuing to be employed. 

Of course the types of benefits you can access and the amount that you may receive will vary depending upon the circumstances surrounding your early retirement, both personal and work-related. 

The compensation you receive coupon early retirement will also affect the amount of income-related benefits you receive. 

Other sources of financing, personal income, savings instruments and personal difficulties will also play a part in determining the final set of benefits that you are entitled to. 

In essence, the regulations of benefits are crossed with the unique circumstances in each case, which will determine the array and quantum of benefits that may be due to you. These will be discussed in turn in the following sections.

Eligibility for income-related benefits upon early retirement 

Most income related or means-tested benefits now fall under the rubric of Universal Credit. 

These include Housing Benefits, Income Support, the erstwhile income-based Job-seeker’s Allowance, income-based Employment and Support Allowance, Working and Child Tax Credits etc. 

So , the disadvantage of taking early retirement is that you will probably receive some kind of compensation such as a workplace pension that you would have enrolled in years ago. 

Since the default retirement age has been revoked by the government, you can retire as early as 55 years so as to claim your workplace pension. 

Universal Credit

If you are receiving a workplace pension then this will be counted as income for the purpose of calculating means-tested benefits such as Universal Credit. This will mean that the amount you receive will decline, the higher the pension is. 

Some benefits may be cut out altogether, if your income, savings etc. exceeds a certain point. This can also happen, if you have sufficient income from the pension, and the receipt of the different means-tested benefits exceeds the specific benefit cap that applies to you. 

As a consequence, retiring early has its drawbacks, because an increased income for a short period can deprive you of certain benefits that you may need in the long run. 

So make sure that your financial planning has been done carefully to ensure that the workplace pension you receive will tide you over and cover the costs that would have been taken care of by welfare schemes. 

You should make sure that this coverage lasts for a considerable period of time, since you won’t be earning anything henceforth. Of course there are other situations you may find yourselves in that result in alternative outcomes. Let’s take a look at these. 

Benefits available upon early retirement due to forced redundancy

Sometimes, employers will coerce their workers to either take voluntary redundancy or an early retirement depending upon their age, rather than launch a mass lay-off program. 

While this option is meant to provide a dignified exit, it still does not mean that it was with the employee’s complete consent. 

They may have wanted to continue work, but the pressure from the boss could have pushed them into selecting an option that they knew was detrimental, but they did not have a choice. 

In such cases, there are legal options available. If you feel the early retirement has been forced upon you due to discrimination by age or illness etc. You can contact the same at an employee tribunal or through mediation with your employer. 

But if the early retirement was offered due to unavoidable circumstances , such as the bankruptcy of the company, mergers, workforce reduction due to losses etc. and there has been no discrimination whilst offering voluntary or early retirement, then your employer is justified. 

But there should be an element of coercion, the early retirement should not be voluntary- conditions should have been such that you were forced to leave, even if there is no outright discrimination. 

Only in such cases, you can consider yourself unemployed or out of work. 

The upside is that early retirement before the default retirement age i.e. 65, allows you to access certain unemployment benefits. You can keep adding credits to your National Insurance account, even though you are not working. 

The unemployment benefits you can access, if you have taken early retirement and are now unemployed, you can claim the new-style Job-seekers Allowance- but there are some conditions involved. The following section will detail this benefit. 

New-Style Job-seeker’s Allowance 

If you have opted for early retirement due to forced redundancy, but still wish to continue working, then you can claim a new-style Job-seeker’s Allowance for the period of unemployment until you get a job. 

To be eligible you need to be unemployed or working less than 16 hours a week. You also need to have been employed in the past 2-3 years and have made sufficient National Insurance contributions for the same period. Acquiring enough credits also counts. 

If you do not actively search for a job or you wantonly turn down job offers during this period of unemployment, then your JSA benefit will be revoked.

You need to prove that you are actively searching for employment in accordance with the Claimant Commitment that you enter into with your work coach at your local jobcentre. 

But if you have taken completely voluntary early retirement, your JSA benefit may be delayed or you may even be ineligible if you don’t intend on resuming some kind of work. 

If you haven’t paid enough National insurance contribution to be eligible for JSA, then you may be able to claim the unemployment component for Universal Credit instead. 

Keep in mind that any workplace pension you receive either as an annual payout or a lump-sum payment will affect the amount of unemployment benefit you receive under Universal Credit. But it doesn’t affect the payout of JSA benefits, because this is a contributory benefit.

Benefits available on early retirement because of illness 

You may have chosen to retire before the State Pension age, if you have a chronic illness or disability that prevents you from working. In this case there are certain concessions that can be made and special benefits that you can claim.

Private/Workplace Pension Concessions

In the case of private pension, the minimum age of 55 is further relaxed, if one retires due to poor health or disabilities. Workplace and private pension schemes have varying conditions, depending on the company and the pension provider. 

The DWP will ask to see a medical certificate that proves that you cannot continue working due to physical or mental incapacity. 

If you are terminally ill and you are not expected to live for more than a year, you will receive your pension money as a lump-sum payment that is not subject to taxes. This is only if you haven’t tapped your pension fund yet and if you are below the age of 75. 

For those above 75, the lump-sum will be taxed, even though it will still be given to you.

New-Style Employment and Support Allowance 

If you have chosen to take early retirement because you have difficulties working on account of health problems or debilitating disorders, then you can claim the new-style ESA. 

If you have paid sufficient National Insurance contributions for the past 2-3 years or gained enough credits, then you can claim ESA. 

You will have to undergo a Work Capability Assessment to gauge how much your disorder affects your work capacity. You could have been either employed or self-employed. 

This blog has detailed the different benefits one can claim if they choose early retirement. 

It has also emphasized the conditions imposed on their receipt in terms of eligibility and other work-related circumstances and the consequent impact on the amounts received and the ability to claim itself. 

If you have any queries, comments or suggestions, please feel free to contact us and leave a message. We welcome your input. 

Frequently Asked Questions (FAQs) – Can I claim any benefits if I retire early?

What happens to my State Pension if I retire early? 

You are still in possession of your State Pension if you retire early, but you can only claim the pension amount after you have reached the official State Pension age. 

Since you have retired, before time, you cannot continue to make contributions from your earnings towards the fund, because you aren’t receiving any income. This will severely limit the amount of State Pension you receive when you become eligible. 

To counter this situation you can make voluntary contributions but this will only further diminish your liquidity and financial security. 

You can also add to the National Insurance fund through the credits you receive from social security schemes, but these are hardly enough to make up for regular contributions, and they also depend upon your eligibility and receipt which may be minimal. 

For more information on this matter please refer to – Early retirement (citizensinformation.ie)

Can I claim State Pension for early retirement on account of illness? 

No. Unfortunately State Pension cannot be claimed early before the designated age, which is now about to be raised to 68 years. 

Once you reach the State Pension age you can claim the full amount, but prior withdrawal is not permitted, even in situations of terminal illness. 

For this you may have to rely on your own personal or workplace pension schemes that make provisions for terminally ill patients with less than a year of life expectancy. 

But you can claim other benefits in lieu of this pension, such as disability benefits, Universal credit and new-style ESA, depending upon your meeting the eligibility criteria. For details, refer to – Early retirement because of illness, sickness or disability (money helper.org.uk)

Can I claim disability benefits if I take early retirement?

Yes. If you have taken early retirement on account of health issues, whether physical or mental, you claim disability benefits. These are available even while working, but also if you have retired early. 

These include Personal Independence Payment (PIP), Employment and Support Allowance (ESA), and Attendance Allowance (AA). If you are above State Pension age, you can only claim Attendance Allowance and the State Pension, The other benefit payments will cease. 

Will my State Pension be affected if I receive a workplace/private pension upon early retirement? 

No. Your State Pension depends upon the number of years and contributions you have made to the National Insurance pension fund. 

The cashing in of a private pension upon early retirement, whether due to ill health or otherwise does not impact the amount of State Pension you receive. 

It is not means-tested and there is no penalty for dipping into a private/workplace pension pot. To read in greater detail, refer to- State Pension: Do you get less if you have a private pension? | Personal Finance | Finance | Express.co.uk.

Can I claim an NHS pension if I retire early from the National Health Service?

Yes. NHS pension is accumulated from the salaried contributions of the service workers. 

If you retire early from the NHS, you can still receive the pension, but it will be reduced according to the age at which you retired to compensate for the longer period of provisioning. 

As of this year, the standard retirement age is the State Pension age, and retirement before this age, will result in a tapering down of annual payouts to reflect the longer years of requirement. 

To understand this better, we suggest you look into – NHS pension schemes explained – Which?

References : 

  1. Government Digital Service. (2011, December 8). Early retirement, your pension and benefits. GOV.UK. https://www.gov.uk/early-retirement-pension
  2. Early retirement, your pension and benefits. (n.d.). GOV.UK. https://www.gov.uk/early-retirement-pension/personal-and-workplace-pensions
  3. Early retirement, your pension and benefits. (n.d.). GOV.UK. https://www.gov.uk/early-retirement-pension/benefits
  4. Citizensinformation.ie. (n.d.). Early retirement. Www.citizensinformation.ie. Retrieved November 19, 2021, from https://www.citizensinformation.ie/en/social_welfare/social_welfare_payments/older_and_retired_people/early_r
  5. Jobseeker’s Allowance (JSA) | Advice | Independent Living. (n.d.). Www.independentliving.co.uk. Retrieved November 19, 2021, from https://www.independentliving.co.uk/advice/jobseekers-allowance-jsa/
  6. Early retirement because of illness, sickness or disability. (n.d.). MaPS. Retrieved November 19, 2021, from https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/early-retirement-because-of-illness-sickness-or-disability
  7. Early retirement. (n.d.). MaPS. Retrieved November 19, 2021, from https://www.moneyhelper.org.uk/en/work/losing-your-job/early-retirement#
  8. Davies, P. (2017, August 22). NHS pension schemes explained. Which? Money. https://www.which.co.uk/money/pensions-and-retirement/company-pensions/public-sector-pensions-explained/nhs-pension-schemes-explained-azydt0q5t434
  9. Will taking my pension affect my State Pension? (n.d.). Help and Support. Retrieved November 19, 2021, from https://thepeoplespension.co.uk/help/knowledgebase/will-claiming-my-pension-affect-my-state-pension/#:~:text=Your%20State%20Pension%20is%20based
  10. Higham, A. (2020, October 14). State Pension: Do you get less State Pension if you have a private pension? Express.co.uk. https://www.express.co.uk/finance/personalfinance/1344932/state-pension-do-you-get-less-state-pension-if-you-have-private-pension
  11. I’m in my fifties. (n.d.). Your Pension. Retrieved November 19, 2021, from https://www.yourpension.gov.uk/having-more-for-retirement/fifties/

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