Can you access your pension when working as a contractor?

If you work as a contractor, your pension functions much the same way as anyone else. In this article, we'll look at accessing your pension when working as a contractor.

Can you access your pension and continue to work?

In short, yes. If you are over 55 you can usually start accessing your private pension and continue to work. The same goes for your State pension. You can claim your payments once you reach State pension age and continue to contract.

Remember, you'll need to have made at least 10 years of National Insurance contributions to be eligible for any State pension. You'll need a full 35 years on your National Insurance record to get the full State pension - £221.20 a week as of the 2024/25 tax year.

As you progress in your career and approach retirement age, you might decide to reduce your working pattern to two or three days or work on more of a consultancy basis. Using your pension to supplement your income can help compensate for any reduction in hours, however, there is one thing you need to be aware of: tax.

Watch out for tax

When you're ready to start withdrawing from your pension, you can access your money in a few different ways. You can buy an annuity to provide a steady income for the rest of your life, or you can access your pot a little more flexibly using what is known as drawdown.

Using drawdown, you can take out 25% of your pot completely tax-free. The rest however will be liable to income tax. This means that taking an income from your pension as well as your job could affect how much you owe in your tax return. For more on how this works, check out our article on pensions and tax.

Before you start withdrawing from your pension, it's important to understand the tax implications on your income. It's always best to speak with a financial adviser before taking any action.