Retiring before your State Pension: how to bridge the gap

If you stop work before 67, every year until your State Pension starts has to come from your own money. Work out the yearly shortfall, multiply by the years, and that is the bridge you need. Then spend it in the right order: ISAs and savings first where you can, pension pots second, and keep your personal allowance working every year.

Figures for the 2026/27 tax year · Published 2 October 2026

The State Pension age is 67 for anyone born on or after 6 March 1961, and it is rising from 66 to 67 between 2026 and 2028. Plenty of people want to stop work well before then. The question is never “can I retire at 60?” It is “what pays for the seven years before the State Pension turns up?”

Step one: size the gap

Start with what you want to spend each year after tax. Then list what will already be coming in during the bridging years: a final salary pension that starts at 60, rent, part-time work, a partner’s income. The difference is your yearly shortfall. Multiply it by the number of years until your State Pension and you have the bridge.

A worked example. Sam is 60, wants £2,500 a month after tax (£30,000 a year), and has a State Pension forecast of the full £12,548 from 67. Nothing else comes in until then. The shortfall is the full £30,000 a year for seven years: £210,000 in today’s money, before growth and before tax on any pension withdrawals.

That last clause matters. If the whole £210,000 came out of a pension pot it would be taxed on the way out. With 25% tax-free and the rest at 20% above the personal allowance, Sam needs about £32,300 gross a year rather than £30,000. Over seven years that is about £16,000 of tax the plan has to find.

Step two: decide which money to spend first

Most people retiring early have three kinds of money: cash and ISAs, pension pots, and anything else (a GIA, premium bonds, a property they might sell). The order you use them changes the tax bill and, for pensions, what you leave behind.

• ISAs and cash are tax-free to spend. Using them in the bridging years means you can keep pension withdrawals small enough to sit inside your personal allowance, or avoid them entirely.
• But an empty personal allowance is wasted. Every year you take nothing taxable, £12,570 of 0% tax goes unused. Many people are better off drawing just enough taxable pension income each year to fill it, and topping up from ISAs.
• Pension pots have an edge on death. Until April 2027 most unused pension funds sit outside your estate for inheritance tax; from 6 April 2027 they are brought in. Our inheritance tax guide covers the change. Either way, a pension passed on by someone who dies before 75 is still income-tax-free for the beneficiary, so the old “spend ISAs first, pensions last” rule has not gone away entirely.

Sam has £60,000 in ISAs and £320,000 in pension pots. One sensible pattern: each bridging year, take £16,760 from the pension (25% tax-free, the remaining £12,570 inside the personal allowance, so no tax at all) and £13,240 from the ISA. The ISA runs out after about four and a half years, at which point pension withdrawals rise and some basic-rate tax starts. Total tax across the seven years falls from about £16,000 to around £6,000.

Step three: the minimum pension age

You can normally take money from a workplace or personal pension from 55. That rises to 57 on 6 April 2028, so anyone who is not 57 by then (broadly, born after 5 April 1971) will normally have to wait until 57, unless their scheme gives them a protected pension age. If you are planning to stop at 55 or 56, check your date of birth and your scheme now. It changes which money has to carry the first two years.

Step four: stress-test it

The bridging years are the most dangerous years in a retirement plan, because you are selling investments to live on at exactly the time a market fall would hurt most. Two protections:

• Hold the first two or three years of the bridge in cash or short-dated gilts. Then a bad year in the markets does not force you to sell low.
• Run a cautious case. If growth is 2% below what you hoped, does the money still reach 67? If not, the plan depends on luck.

Step five: don’t forget the small stuff

• National Insurance record. Stopping work early can leave gaps. Check your record on GOV.UK; you need 35 qualifying years for the full new State Pension and can usually buy missing years for £956.80 each in 2026/27 (Class 3), which pays for itself in under three years.
• The Money Purchase Annual Allowance. Once you take taxable income from a pension pot (not just tax-free cash), the amount you can pay into pensions in future drops to £10,000 a year. If you might go back to work, take tax-free cash only, or spend ISAs first.
• Deferring the State Pension. If you do not need it at 67, each nine weeks of deferral adds about 1% for life. That is a decision for 67, not now, but it is worth knowing it exists.

Putting it together

Sam’s bridge is £210,000 of spending over seven years. With £60,000 of ISAs and £320,000 of pension, the money comfortably reaches 67, the State Pension then covers 40% of spending for life, and the remaining pot has to carry the other 60% from 67 onwards. Whether that lasts to 90 depends on growth and on whether spending falls later in life, which it usually does. The bridge is the hard part; it is also the part you can plan precisely, because the dates are known.

Once the gap is sized and funded, run the whole plan through a stress test. Our guide to how safe your retirement plan is explains what the probability means and which lever moves it most.