The countries where workers can dip into their pension pots early, mapped

As Labour considers making reforms to the pension system, we examine where around the world early pension access is already a reality

British workers could soon be allowed to access part of their pension savings long before retirement, under proposals reportedly being considered by Labour.

The idea, dubbed “sidecar savings,” would let people draw down a small portion of their pension for emergencies or major life events – potentially at any age.

Supporters argue it could help those living pay slip to pay slip, while critics warn it risks draining retirement funds too early.

But the UK wouldn’t be the first to do it. A growing number of countries already allow workers to dip into their pensions early, in some cases to buy a home, pay for big and unexpected bills or deal with financial hardship.

New Zealand

New Zealanders can access their retirement accounts – known as KiwiSaver – early but only in certain scenarios.

Employee participants can choose to contribute 3, 4, 6, 8 or ten per cent of their gross pay.

The most common reason for withdrawal is to buy a first home which people can do with a one off withdrawal after three years of membership.

Withdrawals are also allowed for significant financial hardship, for example, if someone can’t meet basic living costs, faces serious health issues, or needs to cover funeral costs for a close family member.

However, gaining access is tightly controlled and must be approved by the scheme’s supervisor.

Australia

Australia’s superannuation system also has strict rules around early access, but exceptions do exist.

Workers can apply to withdraw money on compassionate grounds – such as needing to pay for medical treatment, make mortgage payments to avoid losing their home, or cover funeral expenses.

There’s also a hardship route, available to those on income support, who can prove they’ve been in financial strife for over 26 weeks.

But much like New Zealand, these rules are carefully enforced.

Turkey

Turkey rolled out a new early access scheme last year, allowing people in its voluntary pension system to take out up to 50 per cent of their savings for major life events.

That includes getting married, buying a home, paying for higher education or dealing with the aftermath of a natural disaster.

To qualify, workers must have been saving into the scheme for at least five years and must agree to stay in the system for a set period after withdrawing.

Education withdrawals will become available from 2026. It’s one of the more flexible models globally, though still strictly regulated.

Uganda

In Uganda, savers can tap into their retirement funds from age 45, provided they’ve contributed to the country’s national scheme for at least a decade.

They’re allowed to withdraw up to 20 per cent of their savings – or 50 per cent in the case of disability.

The rule, introduced in 2022, was originally aimed at supporting people hit hard by the pandemic.

It’s now part of the long-term system – a rare example of early access built into a national pension framework.

South Africa

South Africa changed its pension laws this year to let people access part of their savings early.

Under the new “two-pot system,” workers can make limited withdrawals from a short-term savings component in emergencies, while the bulk of their retirement savings remains locked away.

The reform followed growing pressure from workers who said they needed help covering short-term expenses. But the Government insisted on a structure designed to prevent long-term pension erosion.

Europe

Several European countries offer early access to pensions, usually through long-service retirement schemes rather than cash withdrawals.

In Denmark, for example, workers with at least 42 years of contributions can retire up to three years early. In Germany, those with a 45-year career can do the same, though with a reduction in pension payments.

Italy, France and others offer similar models, with access granted earlier based on how long someone has worked, not how urgently they need the money.

United States

In the US, many pension savers can access their funds early. It often comes at a cost though. Americans can take money from 401(k) retirement accounts before age 59½, either as a loan or a hardship withdrawal.

The 401(k) is an employer-sponsored retirement savings plan where employees can contribute a portion of their pre-tax income. 

Loans have to be repaid within five years, and hardship withdrawals are subject to income tax and a 10 per cent penalty in most cases. People may also be on the hook for ordinary income tax on the amount withdrawn.

Despite the downsides, it’s a common practice, and some argue it has helped drive higher pension participation overall.

Rules in the UK and why it matters

Currently, you can usually only take money out of a workplace or personal pension once you’re 55 or older – rising to 57 from April 2028.

You can’t start claiming you state pension before you reach state pension age, which is 66 right now, rising to 67 between 2026 and 2028. A further increase to 68 is planned between 2044 and 2046, but some experts believe this could be brought forward.

It comes as work and pensions secretary Liz Kendall announced a new review this week, looking into how it might increase again.

Elsewhere, as part of a different review of the UK pension system, minsters are reportedly weighing up whether some form of early access could help workers better manage financial shocks, especially at a time when real wages are squeezed and household debt is rising.

The global picture shows there are trade-offs when it comes to this, with most countries that allow early access doing so with strict conditions, limited amounts, and long-term safeguards.

Joe Dabrowski, deputy director of policy at Pensions UK, said: “We expect the pensions review to be quite broad in scope and that might include looking at sidecar savings, which I think is essentially what’s been pulled out as part of the pre-launch speculation.

“I wouldn’t expect it to include substantial amounts of allowing people to access their pensions more broadly across their lifetime, certainly not in large amounts, because when that’s been tried in Australia during the pandemic and the US it’s tended not to work very well, because people take the money out and it never goes back in.”